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.