Currently, about a fourth of the 47 million Medicare members have chosen HMO-type, Advantage plans offered by various private insurers over the traditional fee-for-service plans with direct oversight by Medicare.
The enrollment in these plans remained at about 13 percent from their inception in 2003 until 2007 when Medicare changed to a bidding process to set the per enrollee reimbursement fee. That year, membership jumped to 19 percent with the explosion of plans offered, particularly in rural areas. Three to five percent more joined each of the next three years. But it's slowed dramatically since 2009.
Ancillary services have been hit the hardest. "People won't sign up for the plans if they don't see their own physician or hospital listed," says one anonymous source. "But people don't think about fringe things when picking a plan." So unlike physicians, ancillary providers hold few cards in the Advantage plan power plays.
Once an individual chooses an Advantage plan, he must stay with it until enrollment opens at the end of year. And unbeknownst to many people, their choices for services narrows to only those approved by the insurer. A provider having been deemed Medicare-approved means nothing, since the insurers pick their own network of providers.
That leaves ancillary services scrambling to get on board with every Advantage Plan. "These plans have to cover the minimum of what Medicare covered, but not at the same cost sharing amount," says another source. So negotiations determine the reimbursements, leaving the smaller providers with little bargaining room since their margins are already so small.
"It's hard to become a contractor," says the owner of a medical equipment provider. "We can't take a majority of the plans, because we would have to accept only 70 percent of the allowable [set by Medicare] and we can't bill the patient for any of the remainder. That's in the contract."
Initially, this equipment provider tried to become a contractor with all the Advantage plans. "I was losing patients left and right," the owner says. "Patients would hand us their insurance card, and it would say it was Medicare Complete or one of those plans, but we couldn't take it. The patients didn't understand, because it said 'Medicare.'"
Even worse was having to go pick up equipment after a bill would come back denied by Medicare because a current patient had switched to an Advantage plan. "The insurers don't lie, they just don't present the full scope of things," the owner says. So customers think they've made a wise economic choice, "but suddenly they find they have to move grandma off that bed and swap out the oxygen. It's sad."
When the plans first came out, this medical equipment provider was losing about 30 percent of their Medicare patients. "We were begging to be a contractor. We tried everything," the owner says. After years of effort, they finally involved their state representative and were added to the HealthSpring contractor list.
Now the equipment provider accepts only HealthSpring and Blue Cross Blue Shield's Blue Advantage plan. "We've had no problem with Blue Cross. We were automatically put on their plan," the owner says.
Not so with HealthSpring. The equipment provider owner says HealthSpring sends too many denials and late payments, and the provider plans not to renew. Fortunately, at this time, only about 10 percent of this providers Medicare customer base is on Advantage plans.
"We don't even ask for a contract anymore, we don't want it. It's kicking our backends," says the equipment provider. "Their allowable is less than my cost on a lot of things, so if I accept an Advantage plan, I'm not making anything. With Medicare, I was getting 100 percent."
The anonymous source, who also heads an ancillary healthcare business, says its just business. "Medicare pays insurers a flat amount per member, so they're clearly going to negotiate aggressive rates, and less than Medicare," he says.
With recent legislative changes ending incentives for plans to reach out to rural areas, the Advantage plan landscape will be shifting. "But the plans are here to stay. They have invested lot of time and systems into this," he says.
Humana and UnitedHealthcare hold 33 percent of all Advantage plan memberships. "There are a lot of plans out there, but in terms of who has the membership, it's a pretty small group. The top 20 plans have 70 percent of the membership," says our source.
He believes the future holds consolidations so "the bigger get bigger." And though membership enrollment has leveled off to around 1 percent or less growth these last few years, those attaining Medicare eligibility age may not care about the restrictions like their elders did. So plan membership may hit another growth spurt. "These younger 63- to 64- year-olds have been enrolled in traditional PPOs and HMOs, so they may not see Medicare Advantage as quite the change," he says.
"A provider's natural tendency is to not want to participate with the plans and assume they're all bad," he continues. "The reality is that they're not all bad, and they're not going to go away. So you have got to find a constructive way to work with them."
Advice for Smaller Companies Wanting Medicare Advantage Plan Dollars
by Jane Ehrhardt
For smaller companies seeking to be part of Medicare managed plans, start laying groundwork now for another version of these plans coming soon.
Within a couple of years, Medicare plans to create another power base other than insurers when it comes to doling out their dollars. They're planning to establish Accountable Care Organizations (ACO).
"The thought is that it would be a hospital system that takes the risk for Medicare patients for each episode of care," says our anonymous source. "So that even through post-acute care, Medicare pays a flat amount through the entire episode."
Hooking into these ACOs may allow smaller players to participate in this new faction of Medicare. The question for right now, he says, "is can you position yourself to be part of the panel of care that that ACO is going to use?"
"Think pro-actively," he adds. "Is there a way to become an affiliate with this larger organization now? To get conversations going now? It's really hard for the stand-alone person, but get your feet under the table now and show your value to them."
Because once they put together their team and decide how they will manage their newly acquired Medicare dollars, the task becomes daunting for the smaller ancillary businesses. "The natural tendency is to select your team members from a group of people you already know, so this is a way to get ahead of that and position yourself with these ACOs before the decision is made. But remember at the end of the day, decisions will still depend largely on how to best manage the dollar."