Managed Medicare Advantage Plans Demonstrate Better Outcomes for Patients

BOSTON, MA--(Marketwired - May 14, 2013) - As health systems around the world experiment with alternative models for care delivery and reimbursement to improve health care quality and lower cost, they can learn a lot from the care-delivery models used by private payers in U.S. Medicare Advantage plans, according to a new study by The Boston Consulting Group (BCG).

After analyzing claims data for 3 million Medicare patients, BCG found that on three internationally accepted dimensions of health care quality -- single-year mortality, recovery from acute episodes of care requiring hospitalization, and the sustainability of health over time -- patients enrolled in Medicare Advantage plans offered by private insurers had considerably better outcomes than those participating in Medicare on a traditional fee-for-service basis. The improved quality is delivered on top of the well-understood point that these models already deliver lower costs.

"Our findings demonstrate that the more managed plans do not compromise quality. Just the opposite: they deliver higher-quality care at a lower cost than fee-for-service medicine and thus do a better job of improving health care value," said Jon Kaplan, a BCG partner and lead author of the study. "Payers, providers, and policymakers have a lot to gain by more broadly aligning incentives and delivering strong care management, similar to that utilized by the Medicare Advantage plans."

The findings are detailed in a new report titled Alternative Payer Models Show Improved Health-Care Value, released today on www.bcgperspectives.com.

The majority of the U.S. Medicare-eligible population receive care from doctors and other providers on a traditional fee-for-service basis, with the costs of the services reimbursed directly by Medicare. About one-quarter are enrolled in Medicare Advantage health plans provided by private insurers.

What distinguishes Medicare Advantage plans from traditional fee-for-service plans is the degree to which they use mechanisms designed to encourage the delivery of cost-effective quality care. Three critical mechanisms are financial incentives that are aligned with clinical best practices, a selective network of providers, and more active care management that emphasizes prevention to minimize expensive acute care.

Of the 3 million patients for which BCG analyzed data, approximately 1.3 million used providers on a traditional fee-for-service basis. The remainder were enrolled in one of three types of private Medicare Advantage plans: a preferred provider organization (PPO), a health maintenance organization (HMO), or an HMO with global capitation.

Among the study's specific findings:

• Single-year mortality rates fell from 6.8 percent in the traditional fee-for-service sample to 1.8 percent in the three progressively managed delivery models. The lowest rates and the greatest performance were seen in the HMO plans with global capitation. Patients in the three managed models achieved these lower levels of single-year mortality quickly, within the first year of enrollment.
• Patients in the Medicare Advantage plans had shorter average stays in the hospital. Compared to the fee-for-service sample, the capitated HMO sample had stays that were, on average about 19 percent shorter.
• Patients in the managed plans were more likely to receive preventive care and less likely to suffer from disease-specific complications. For example, diabetic patients in the fee-for-service sample had an average of 11.5 amputations per 1,000 patients; those in HMO plans with global capitation had only 0.3.

"We've found that U.S. private insurers have created an operating model that can deliver better care at a lower cost and have a major role to play in the ongoing national efforts to improve health care quality," said Stefan Larsson, a BCG senior partner and coauthor of the report. "Quite simply, we've found that the more aligned the care, the better the quality delivered."

To arrange an interview with one of the authors, please contact Madeleine Desmond at +1 212 446-2856 or desmond.madeleine@bcg.com.

About The Boston Consulting Group
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