Medicare has released  its grades for Medicare Advantage and Part D plans, and I was shocked.  Tucson finally has four-star Medicare Advantage plans.

The ratings go from one star to five stars and are based on more than 30 criteria such as: member complaints; members leaving the plan; surveys of members and their satisfaction with the plan; telephone customer service; managing chronic illnesses of members; how many members get screening tests and flu shots.

As an insurance agent, I can’t name names, lest someone think I’m promoting specific Medicare Advantage plans. But I will say that the newly-crowned 4-star plans in Tucson are relatively new to town – and they are all under one company. I have heard both positives and negatives about this company and its plans. This company has a very interesting model of care, especially for people with chronic illnesses.  Some doctor groups contracted with this company dropped out of the network in mid-year, leaving patients unable to see their doctor, who was then out-of-network. Many seniors enrolled with this company seem very happy with their plan and the attention they get from it. Some people have dropped, or will dis-enroll from these plans because they are unhappy with the network or the plan’s referral process. Please note that I am reporting what I have heard about these 4-star rated plans – both good and bad.

As with all Medicare Advantage plans, there are good things about them and  bad things. Choosing an Advantage plan based on the star rating system alone will not work for most people.

The rest of the Medicare Advantage plans in town, at least those that have been around for some time, have improved their ratings from 3 stars to 3.5 stars. The higher scores are due to concerted efforts by the plans to please Medicare. For example, plans have been calling and writing their members to encourage them to get annual preventive screening tests that are provided at no cost. Medicare wants Advantage plans to spend money on their members to try to keep them healthy – and this is a good thing.

Phoenix has three Medicare Advantage plans that get 4.5 stars.

MORE STARS MEAN MORE MONEY

In 2012, the star ratings will be very important because Medicare will pay bonuses to Advantage plans that get three or more stars. Five-star plans will be able to enroll new members all year long.  Unfortunately, Arizona doesn’t have any 5-star plans.

Fortunately for Arizona, 3-star and 3.5-star plans will get bonuses, because Medicare looked around and saw that most Advantage plans fall into this “average” range. The bonus rules were changed in order to keep the vast majority of Medicare Advantage plans in business. All Advantage plans are working hard to make improvements, with a goal of obtaining a 5-star rating  (and higher bonus payments from Medicare). This is a good thing for people enrolled in Advantage plans.

The summary rating gives an overall score on the health plan’s quality and performance in 5 categories:

• Staying healthy: screenings, tests, and vaccines. Includes how often members got various screening tests, vaccines, and other check-ups that help them stay healthy.
• Managing chronic (long-term) conditions. Includes how often members with different conditions got certain tests and treatments that help them manage their condition.
• Ratings of health plan responsiveness and care. Includes ratings of member satisfaction with the plan.
• Health plan member complaints, appeals, and choosing to leave the health plan. Includes how often members have made complaints against the plan and how often members choose to leave the plan.
• Health plan telephone customer service. Includes how well the plan handles calls from members.

To see how Arizona Medicare Advantage plans are rated, use this link:  Medicare.gov

WellPoint, the largest health insurance company in the country, will purchase CareMore, a Medicare Advantage plan with around 10,000 members in Arizona and 44,000 in California. The deal is worth a reported $800 million for the private investment firm that owns CareMore.

An article in the Indianapolis Star, the local paper in WellPoint’s home town said:

“The for-profit Medicare contractor, CareMore Health Group, has pioneered the practice of intensely monitoring and treating chronically ill older patients in order to improve their health while holding down their government-paid medical bills.

CareMore uses a sophisticated information technology system, with proprietary products that include remote monitoring devices, to coordinate care to 54,000 patients who have multiple health problems and are the costliest segment of the population to treat. Payment comes from Medicare, typically in fixed monthly amounts. There are typically no additional fees, copayments or deductibles for patients.

CareMore says its approach saves Medicare money by reducing multiple doctor visits, decreasing hospital stays and offering better instructions and care to patients so they stay on their treatment plans.”

The article is wrong about “no additional fees, copayments, or deductibles”. CareMore members do not pay a monthly premium, but they have co-pays for all medical services – though they are lower than most other Medicare Advantage plans’ co-pays.

Does Medicare Advantage have a future?

Medicare Advantage is very much out of favor with the current administration that runs Medicare – and the Affordable Care Act requires Medicare to cut payments to Medicare Advantage plans like CareMore. The reductions will go into effect over the next three years and will cut into profit margins for all Medicare Advantage plans and the companies that run them. So it is very interesting that the largest insurance company in the country is investing nearly $800 million in a company that is in a business that is supposed to go out of business over the next few years. WellPoint must know something we don’t know!

An editorial earlier this year in the journal of the American Geriatrics Society said:

“The CareMore model may emerge as the dominant model for healthcare delivery for seniors with chronic diseases.”

As Medicare tries desperately to cut expenses while 1 million baby boomers turn 65 each year, the CareMore model – and the Medicare Advantage model – might get a new look. The problem I see for these models is that they are for-profit. But the CareMore model is so cost efficient that they can probably handle lower reimbursements from Medicare.

Some critics of Medicare Advantage point out that these Medicare replacement plans offered by insurance companies tend to enroll healthier seniors. Healthier seniors with lower medical costs would lead to higher profit margins for insurance companies, which are paid a monthly amount by Medicare for each person enrolled in their Medicare Advantage plan.

But it turns out that having unhealthy seniors in a Medicare Advantage (MA) plan can actually be a good thing.  This is because the payment received by MA plans is based on the risk scores of their members, according to an article I found on healthcaretownhall.com.

According to the article, CMS (Centers for Medicare and Medicaid) assigns a risk score to every person enrolled in a Medicare Advantage plan based on age, gender, disability status, and health status.

Health status is based on medical treatments the member received in the previous year and covers 80 different conditions, each with its own code and risk adjustment factor.

So if a senior enrolled in an MA plan has Diabetes, his risk score increases by a certain amount, resulting in an additional payment to the MA plan of about $100 per month.  Medicare Advantage plans in Arizona are paid around $800 per month for a healthy person, according the the Medicare Advantage Plan Tracker at kff.org

A good example of a company benefiting from higher payments for sicker members is CareMore, a California-based Medicare Advantage company that came to Tucson two years ago and expanded to Phoenix in 2011.  CareMore has several MA plans in Tucson and Phoenix which target seniors with chronic illnesses such as Diabetes, breathing disorders, or heart disease.

CareMore gets more money from Medicare for becoming the Medicare replacement plan for seniors with chronic illnesses, and then tries to keep their members from ending up in the hospital.  The result is a very healthy profit margin for CareMore, while members of their plans get a lot of attention aimed at keeping them stable.

CareMore also has their Value plan which does not require a senior to have a chronic illness.  But CareMore gets the correct risk assessment payment by doing an in-person health assessment for every person who joins their Medicare Advantage plan.  That assessment includes taking a verbal health history from the senior and asking what they are concerned about regarding their health.  The meeting in a CareMore center also includes a blood pressure check and blood tests for cholesterol and sugar levels.

Other Medicare Advantage plans assess their members by reviewing their medical records, including doctor charts if they have been hospitalized. This can get expensive for MA plans, so they don’t do it for every person enrolled in their plans.

When Medicare Advantage plans were originally proposed, they were supposed to save Medicare money by shifting the risk to insurance companies.  The risk assessment payments have made Medicare Advantage a less risky business for insurance companies and more expensive for Medicare.