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 Framework Plan Calls for Multiyear Medicare Advantage Plans

At a time when more long term and post-acute care (LT/PAC) providers are starting Medicare Advantage (MA) plans, experts in the field are calling for the expansion of MA plan designs to allow Medicare beneficiaries to enroll in MA plans for more than one year, to periods of at least three years.

The new Leavitt Partners white paper, “Multiyear Medicare Advantage Plans: A Framework for Action,” is authored by Michael Leavitt, the former Republican governor of Utah and Health and Human Services secretary under President George W. Bush; Kerry Weems, former acting administrator, Centers for Medicare & Medicaid Services (CMS); and Josh Trent, former chief counsel for health on the House Energy and Commerce Committee.

Instead of traditional one-year MA contracts, the paper proposes a framework to start to remove institutional and traditional barriers to a value-based health insurance product.

“There are a variety of reasons health insurance is a one-year contract, not the least of which is the difficulty of estimating costs and risks over a multi-year period and pricing the premium accordingly,” the authors said. “However, yearly contracts can also cause distortions such as causing risk-bearers [the health plans] to forego costly first-year investments that may not be recouped, or devise formularies that exclude drugs and devices that are not economical for a short-term contract.”

And, importantly as the health care system moves to a pay-for-value model and away from fee-for-service, the paper said the single-year insurance term may create an obstacle to value-based contracts between and among providers and suppliers.

“One year is a fairly limited time frame to be able to measure and allocate improvements in health status or other shared gains. Even in the cases where disease management and formularies are optimized, other circumstances such as long-term mental health treatment and social barriers to proper care could be better managed with a longer-term contract,” the paper said.

In contrast, the report said over a longer insurance period, risk-bearers could amortize, or spread out, their investments over the life of the contract.

Noting that roughly one-third of all Medicare beneficiaries are enrolled in the MA program, the paper said the program offers a chance to expand the length of health plan contracts, namely because MA plans contract with the government, allowing opportunities to isolate and manage risks specific to a multiyear plan, including risk adjustment and other risk mitigation strategies.

“The health status and associated risks of the participants are often fairly well known because MA insurers and the federal government have multiple years of data regarding the insured population,” the paper said. And, in addition, retention in MA is high, with an average of 90 percent retention each year.

Still, the longer contract terms may help keep those who are more prone to drop their MA plans after one year under contract longer. “Some research shows that substantially higher disenrollment from MA plans occurs amongst high-need and Medicare-Medicaid eligible enrollees, or dual-eligibles,” the report said.

To explore the possibilities in MA, Leavitt proposes a Multi-Year Medicare Advantage Plan (MyMap) demonstration project to help improve health outcomes and reduce costs of care for individuals with certain conditions. Medicare beneficiaries with high-cost chronic disease needs, or high-cost acute medical episodes, could realize substantial benefit under MyMap, they said, as upfront investments that would be recoverable over a multiyear period.

This model could also result in better care management and better outcomes for beneficiaries.

“Moreover, higher patient satisfaction with plan performance could translate into higher satisfaction scores and less plan switching or disenrollment from MA—thus increasing the number of covered lives under MA, as well as plan margin,” the report said.

The authors said there are risks to a multiyear approach, namely that adverse risk happens, which means expanded-length MA plans could attract individuals with high-cost chronic conditions.

“The proposed multiyear MA product is also subject to risk of disruptive innovation, such as significant advances in precision medicine or biotechnology, given the difficulty of anticipating and predicting financial impact,” the report said. “For example, a Medicare coverage change or FDA approval for a new very high-cost drug, not originally accounted for in the premium calculation, may strain a multiyear contract.”

Read more on the proposal at www.leavittpartners.com.

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