Wednesday, February 29, 2012

Helpful Advice for Insurance Company Executives: How To Make More Money

Dear Insurance Company Executives:

Our hearts go out to you. Many in the public simply do not understand how hard your jobs are. And no where is your job as hard as when it comes to your Medicare Advantage product.

Most Medicare patients are in fee for service Medicare. Medicare pays providers for each service the senior needs. Medicare Advantage plans offer an additional option for seniors. Instead of fee for service Medicare, they sign their care over to a Medicare Advantage plan offered by your companies.

The good part about this is that your company gets paid by Medicare. But the bad news is that your company then becomes responsible for all the senior's health care costs. If the senior costs less then your payment from Medicare you make money. But if they cost more, you lose money. And many seniors need a lot of healthcare and cost a lot of money. Money that should be going to your shareholders and funding the large bonus payments you so richly deserve gets diverted to providing health services.

So you have a big challenge. You need to market your plan in such a way that less expensive patients choose to enroll in your plan and expensive older patients stay away. One pesky rule that makes this difficult is a Medicare regulation that you enroll all who choose your plan and offer at least the same package of services provided by fee for service Medicare.

But, all is not lost. You do have it in your power to influence who enrolls in your plan. Through clever marketing, you can make it more likely that healthier less costly patients enroll in your plan. And you can increase the chance that more costly less healthy patients stay in fee for service Medicare and stay away for your plan. If you succeed, you may be able to substantially decrease the amount of government Medicare $$ you have to spend on health care.

There is a two part focus to this strategy. Part 1 is to target your marketing towards less costly patients. To do this, you simply need to recognize that seniors who have good functional status are less expensive than those who have less good functional status. This includes seniors who are physically robust, have good cognitive function, and are socially active.

So selectively target your marketing to these types of seniors. For example, advertise in magazines that cater to the physically active--something like golf magazine. Advertise in the opera program to target seniors who are health enough to get out and are much more likely to have good cognitive function. Set up marketing tables at the ballpark. Target seniors who are still able to travel. Target seniors still able to play bridge, or are golfers or bowlers. Maybe make it slightly difficult to call your information line so that only those with good cognitive function can figure out how to get through. On your marketing brochures show pictures of physically active, healthy looking seniors.

The second component of this strategy is to make sure you don't do anything to make your Medicare Advantage plan look attractive to seniors most likely to cost the most--particularly those who are frail. This includes seniors with functional deficits (such as difficulty with basic activities like bathing, dressing, and walking), depression, or cognitive impairment. So no pictures of seniors in wheelchairs in your marketing brochure! No pictures of happy seniors getting physical assistance from loving family members!

Above all, don't get known for excellence in geriatric care. You don't want to be known for innovative care programs for the conditions that most impact aging senior populations. For example, there are proven and highly effective team based multidisciplinary interventions that improve care for high cost conditions such as dementia and depression. If you offer these interventions, don't talk too loudly about them! If patients with these conditions sign up, you will find yourself spending money on healthcare instead of rewarding your shareholders and executives.

Will careful marketing like this really work? Well, a recent study in the New England Journal of Medicine shows the answer is a resounding yes.

This study looked at what happened when Medicare Advantage plans offered a fitness membership benefit. This is a terrific way to selectively enroll healthier less costly patients. Seniors healthy enough to exercise will certainly cost less. And this benefit is unlikely to appeal to costly patients such as those who are frail, have depression, or have dementia.

The authors of this study proved the value of the fitness benefit with an elegant approach. They examined 11 Medicare Advantage plans that offered a new fitness benefit. They compared the health of patients enrolled before the fitness benefit to patients enrolled after the fitness benefit. They found that after the fitness benefit was introduced, seniors were
  • More likely to have excellent or very good health (35% after, 29% before)
  • Less likely to have difficulties with moderate activities (46% after, 51% before)
  • Less likely to have difficulty walking (25% after, 33% before)
These types of health differences are strongly associated with health care costs and are very likely to result in markedly reduced health spending. And while CMS is technically supposed to adjust the payments to Medicare Advantage Plans based on the health risk of patients they enroll, their risk adjustment methods are very crude and very easy to manipulate. They only consider factors measured in the Medicare data such as diagnosis codes. They don't consider factors that have hugh impacts on what patients will cost such as physical function, cognitive function, wealth, and health habits.

So, the good news is that with manipulative marketing, you can position your Medicare Advantage plan so that less costly patients are more likely to enroll and costly patients stay away.

One day, Medicare may get serious about structuring payments so that there is actually an incentive to enroll the most needy seniors and reward plans that provide good quality of care to them.

To start, they could get serious about accurate risk adjustment that considers important factors impacting cost in seniors--factors like physical disability, cognitive impairment, depression, and social isolation.

But there is little evidence Medicare will structure its program anytime soon to be truly responsive to the most serious health concerns impacting seniors. So, no need for insurance executives to worry. With good marketing, your Medicare Advantage plan can be a profit center that pays wonderful dividends to you and your shareholders.

by: ken covinsky @geri_doc

9 comments:

Helen Chen said...

Great post, Ken. As part of a tiny Medicare program that not only welcomes but embraces frail elders (PACE), it is sobering to be reminded of the profit motive that drives so many Medicare Advantage (MA) plans.

The irony about PACE is that even though Don Berwick speaks of it fondly as an example of what might be accomplished if health care systems truly integrated care and took full risk/responsibility for the individual, PACE is lumped in with the other MA plans and is subject to much of the same regulatory infrastructure and reporting requirements. This is a tremendous burden, particularly for small PACE orgs, some of whom have fewer than 100participants, and one that contributes to the fact that 40 years on, our total national enrollment is still measured in the tens of thousands, barely a blip in comparison with the Blues or other huge MA plans.

Carole Larkin MAG, CMC, CAEd, QDCS, EICS said...

Ken Covinsky

I love your sense of humor. Great Post! Two thumbs up!!!

Carole Larkin

Anonymous said...

I hate when the Medicare Advantage plans are portrayed as "being responsible for all the senior's health care costs." The reality is that for subspecialists, they are mandated to provide the same benefit as regular medicare which is 80%. The senior is left holding the bill for the remaining 20%. By law, when enrolled in a Medicare Advantage plan, enrollees can not have a secondary insurance. For a patient with an expensive disease process such as cancer, this will rapidly break the bank. Some of the plans require a co-pay each time the patient comes in for treatment -- a treatment process such as radiation becomes prohibitively expensive.

I work in an a rural area where many patients with regular medicare don't have a secondary, and we take care of those patients usually in the setting of being unable to collect the balance due. But the combined hit of less re-reimbursement to subspecialists by "contract", higher regulatory burden (i.e. an inordinate amount of work to get imaging studies, etc approved, etc) and higher cost to the patient, we have opted not to participate in these "plans."

I am amazed that the higher cost to the patient for subspecialty care with no option for secondary insurance is not an issue. Most "frail" patients will have multiple subspecialists. Is this really better for the patients?

Anonymous said...

The assumption of this comment is that insurance companies are interested in controlling costs. This is not true. They are interested in getting as many beneficiaries as possible (which is why they support the ACA) because the vast proportion of their profit comes from having money pass through them and the investments they can make with the money while it is theirs. That healthcare is involved is only a sideshow.

Anonymous said...

um, yeah. We call it revenue optimization, and there's an entire industry doing it. They're your rules, man. We're just making them work.

And as far as not being allowed to get another policy, it not just disingenuous, it's wrong. Check out tricare, Medicaid, aflac, defined benefit, fraternal, church, and catastrophic care policies. All are legal and common.

Finally, yes, there is some truth to having sufficient critical mass to ride investment earnings as primary profit generators. Do you really think your personal checking account is free because banks love you too?

Look, these people get better care than Medicare can provide in MA programs. Drug interaction prevention? Customer service? Appeals? Coordination of care? Readmission prevention? Radiology management? None of this exists in Medicare.

Christopher Langston said...

Hey Ken - aren't you too young to be so cynical -- please leave this level of crankiness to me :)

But seriously, it is interesting that the bright and shining hope for "Health Maintenence Organizations" just doesn't seem to have come to pass. It almost seems to me that they are working harder on all the tricky marketing and upcoding stuff, than they would if they were just to try to offer really good care. I wonder if part of the problem is the disconnect between insurers and the delivery system in most cases. After all, the insurer doesn't have direct influence on the quality of care outside of strongly integrated systems.

I also wonder about how these incentives will interact in an ACO. I would think that one of the easiest ways to make money in an ACO would be to improve the care of really sick, impaired older people such as those in nursing homes. Their costs are so high and there is so much low hanging fruit, that the room for a cost reduction that will result in "shared savings" seems really big.

And yet, I have yet to hear of possible ACOs stretching themselves to get LTC residents into their population via their primary care provider affiliations.

Will ACOs work but just reducing imaging and "soil banking" radiologist capacity?

Jim Mittelberger said...

Ken,

Are you really focused on the most important issues here? First of all, you completely discount the fact that Medicare Advantage is strongly risk adjusted. This personally believe risk adjustment presents a great opportunity for those who want to provide improved and cost-effective care for the frail and elderly, but it is hard work. As Helen notes, PACE has achieved this, and so has Evercare and many others. While experts would concede this risk adjustment is not perfect, it hardly seems that an insurance program offering a free preventive benefit, health club membership, is doing something evil that is responsible for the failures of modern health care.

On the other hand, I would argue that the incentives in fee for service medicine and the response to them by the entire health care industry have caused great harm to geriatrics, to our health care system and especially to the frail. they have led to providers competing to provide ever fancier buildings and expensive interventions without a focus on outcomes. Joan Teno and others have documented we don't talk with patients dying of dementia leading to burdensome ineffective treatments, and we don't talk to those facing life threatening illness until we have over treated them, leaving them without the precious ability to optimize quality of life near the end of life. Just today At the same time I am reading this morning how Beth Israel hospital has admitted to "supercharging" its services to drive revenue. The more you do, the more you are paid. The predictable result of such incentives-- the extraordinary rise in cost in our system-- without correlated quality. We have a health care cost crisis, but the construction never slows down. Patients in elaborate hospitals get all kinds of highly reimbursed burdensome treatments, then are discharged to the community without a discussion or a POLST completed.

I believe that Medicare Advantage and Accountable Care present a huge opportunity to improve quality. I personally would choose them for my family and did recommend MA to my mother based on care that is more organized and coordinated. Also important, ow income individuals are much better protected from over treatment and really stressful copayments in MA. It is for this reason that MA grew by 10% this last year.

Focusing on outcomes will finally provide support high quality geriatrics. Readmission focus is just the first step. Care will require organized information systems, patient communication and engagement, creative use of a multi-disciplinary teams, and specialized interventions for the most frail. Geriatricians have the opportunity to finally drive quality, and patient-centered care, by understanding the opportunities presented by more organized care supported by accountable care and Medicare Advantage.

ken covinsky said...

Thanks to all for contributing to this discussion. Some selected thoughts on a few of these comments:

Helen--PACE may be the most innovative long term care program of our generation, yet it remains very small and not available in many regions. I have heard others in PACE note that CMS practices of stuffing PACE into the same box (and same rules) as traditional Advantage plans is one of the explanations for the rather slow growth of this innovative program

Chris--I agree that the promise of Medicare Advantage plans has not been realized. While frail elders are the low hanging fruit, it seems unlikely that the promise of lower cost and better quality will be realized until we have good risk adjustment mechanisms to reward care of the frailest patients.

Maybe one day we will see a Medicare Advantage plan marketing their IMPACT program and actually marketing themselves to seniors with depression. But this wont happen until Medicare gets serious about risk adjusting payments for the problems that actually impact health and cost in seniors

Jim--you raise a lot of great points--and it is absolutely true that Medicare fee for service as a whole offers suboptimal care. It is also true that many elements of managed care offer the promise of better quality.

But the point of my post was about incentives that subvert hopes that Medicare managed care will actually improve care of the most needy seniors. Specifically, it was about how payment incentives strongly favor Medicare Advantage plans that cherry pick healthier patients and avoid frail patients. As long as this is the case, most traditional Medicare Advantage plans will not have sufficient incentive to improve quality for the frailest seniors.

I respectfully disagree with your assessment that current risk adjustment approaches are working. How could they? Most risk adjustment models focus on the diagnosis codes that are in Medicare administrative data. But the factors that profoundly impact cost in seniors are not included in these diagnosis codes--things like functional impairment, health habits, cognitive impairment, social support, and depression.

It is hard to see how Medicare Advantage plans can fulfill their promise to improve care and reduce cost till we seriously measure the factors that impact cost of care in seniors, and reward plans that take on the highest risk patients and provide the high quality care.

I will believe that Medicare Advantage Plans are actually committed to improving the health of the most needy seniors when they actually market their services to the most needy seniors. But how many marketing brochures show pictures of seniors in wheelchairs, or promise great care if you have dementia, depression, or severe functional impairment? And how many have pictures of active vigorous elders? These marketing practices are a useful window into their commitment to the neediest seniors.

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