May 8, 2018 | Net Health

6 min read

What’s the Advantage in Medicare Advantage?

Older adults have a few insurance options for healthcare, one of which is Medicare Advantage (MA). MA plans provide coverage for traditional Medicare Part A (hospital insurance) and Medicare Part B (medical insurance), and often provide additional benefits, such as prescription drugs, vision and dental care.

The main difference is that MA plans are offered through private insurance companies and are paid a fixed amount each month to cover a patient’s benefits, instead of through the traditional Medicare fee-for-service (FFS) model.

MA market share has grown in recent years, due in large part to the aging of baby boomers and policies put in place since the Affordable Care Act passed in 2010. Today 33% of Medicare patients choose Medicare Advantage over traditional Medicare, and that number is on the rise. Projections from L.E.K. Consulting’s Healthcare Service indicate that MA enrollment could reach as much as 60% and 70% of the Medicare population between 2030 and 2040.

Why is Medicare Advantage becoming more popular?

According to a study published in Health Affairs, MA plans have been successful because they are spending less and achieving better health outcomes when compared to traditional Medicare. Some of the benefits cited include fewer acute and post-acute care episodes and lower hospital readmissions.

According to analysis from Brookings, a nonprofit public policy organization, the study was significant because it showed these benefits were achieved through closer management and coordination of post-acute care—rather than, as some have argued, because MA plans enroll only healthy seniors.

Beyond hospital outpatient and inpatient acute care however, there is significant concern within the post-acute care (PAC) community that quality of care may suffer under Medicare Advantage, and that patients may have fewer provider choices. A 2017 report from the Government Accountability Office seems to support these concerns.

After examining 126 MA contracts with higher disenrollment rates, GAO found that MA enrollees in poor health were substantially more likely (on average, 47% more likely) to drop out of MA plans because they had trouble accessing the care they needed.

Impact on post-acute care

The fact remains that the MA market is growing, and many of the new people eligible for Medicare are choosing MA plans. What does this growth mean for post-acute care providers? MA plans use a number of strategies to manage post-acute care—how they impact PAC providers depends on the care setting. The following includes an overview of MA’s potential effects on skilled nursing and hospice.

Skilled nursing facilities  

Many in the SNF community are worried that MA plans will disadvantage seniors in need of skilled nursing. It’s a justifiable concern. One recent Brown University study found that traditional Medicare enrollees were more likely to enter higher-quality skilled nursing facilities than Medicare Advantage enrollees.

They’re also concerned about the loss of MA patients to other lower-cost settings, such as home health. While this trend will likely impact SNFs over the long term, a March report from Avalere Health, a Washington, D.C.-based consulting firm, showed that this is only happening in certain areas of the country.

In fact, far more concerning is the overall decline in SNF occupancy. The Avalere report noted that SNF utilization rates have declined by 15% since 2009. According to Fred Bentley, vice president at Avalere Health, “While hospitals that are aggressively moving to value-based payment are shifting discharges from SNFs to home health providers, the biggest driver of the decline in SNF use appears to be the reduction in hospitalizations.”

Hospitals are not only under pressure to reduce costs, they’re also being held accountable for the outcome of a patient following discharge from inpatient care. In response, they’re moving away from traditional inpatient stays in favor of observation stays.

This is significant because to qualify for SNF care, a Medicare patient must have had at least three days of care in an inpatient hospital prior to being admitted to a SNF. If the patient is admitted to the hospital for observation, rather than an inpatient stay, they will not be eligible for SNF care following discharge.

Medicare Advantage could provide some relief to SNFs feeling the effects of low occupancy. Under MA, SNFs can create an in-house insurance plan, known as an institutional special needs plan (I-SNP). This plan is designed to cover MA-eligible individuals who require or are expected to require the services provided by a long-term care facility, such as a SNF. I-SNPs can choose to waive the three-day rule for skilled nursing coverage—giving SNFs an opportunity to provide skilled nursing and manage care for patients without a qualifying hospital stay.


Currently, hospice is not a covered benefit under Medicare Advantage. If an MA beneficiary is in need of hospice care, he/she will be covered by traditional Medicare. However, as MA plans continue to grow, there has been talk of adding hospice care.

Many in the hospice community have expressed concern that the inclusion of hospice care under Medicare Advantage would negatively impact patient care. The Hospice Action Network, a hospice advocacy organization, has argued that based on the industry’s past experience with commercial insurance and Medicaid managed plans, MA plans would limit beneficiary access to the hospice of their choice, decrease quality and increase administrative burden.

It remains to be seen whether MA plans will include hospice care. But one thing is certain—all post-acute care providers will need to be more proactive about how they deliver, track and manage patient care in the future.

Using data to stand out

Outcomes data is the key to success as Medicare Advantage continues to expand and traditional Medicare moves ever closer to value-based payments. SNFs continue to be held accountable for higher-than-expected patient readmission rates—and will need solid, verifiable data to demonstrate their performance.

PAC providers will also need data to compete for the limited number of spots in an MA plan network. According to Brookings, providers will need to convince MA plans that they have lower costs and good patient outcomes in order to win MA contracts.

MA plan providers are putting pressure on post-acute providers to hit aggressive length of stay goals while maintaining high quality outcomes. To meet these targets, PAC providers will need to have the right infrastructure in place—including EMR systems, data analytics and reporting tools that can help them demonstrate their value to MA providers and other referral sources, and more effectively manage patient populations with targeted, patient-centered care.

 For more information on how business intelligence tools can be used to drive decision making and demonstrate patient care, watch our webinar: Dealing with a Data Flood or Drought? Overcoming Issues with Data Intelligence

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