With the 2021 Medicare Advantage and Part D Rule Finalized, Payers may need to Prepare for Higher Medicare Advantage Spending Due to New ESRD Enrollees.
Medicare Advantage plans may see higher healthcare spending on end-stage renal disease (ESRD) populations when the new Medicare Advantage and Part D rule goes into effect, an Avalere study found.
Earlier in 2020, CMS finalized a rule that allowed patients with ESRD to enroll in a Medicare Advantage plan. The rule was controversial for its reimbursement policy, which many plans and organizations found to be too low to cover the costs of ESRD treatment.
As part of the changes, outpatient facilities were no longer included in the list of provider types for which Medicare Advantage plans must ensure patient proximity. In response to stakeholder objections, CMS said that this would incentivize Medicare Advantage plans to contract with a wide variety of dialysis providers.
This would, however, force Medicare Advantage plans to pay a fee-for-service rate if patients use out-of-network dialysis providers that are closer to their home, along with a number of other factors that may increase healthcare spending.
One factor is that the new calculation for Medicare Advantage reimbursement did not account for cost variation by location. Thus, ESRD beneficiary enrollment could spur higher healthcare spending depending on where the beneficiary live.
For example, metropolitan areas see high Medicare Advantage penetration. But plans in these areas would also see a greater disparity between the payments they receive and the costs that ESRD treatments for these populations demand, a separate Avalere study from December 2019 found.
Metropolitan Medicare Advantage plans are not the only ones that could see higher spending. Plans in rural areas would also take a hit, according to the same December 2019 study. When the 2019 study compared new reimbursement levels with previous ESRD cost benchmarks, states like Iowa and North Dakota still were underpaid in some areas by as much as five percent.
Payers will also want to take increased enrollment and shifting demographics into account for next year’s healthcare spending projections. The 2020 Avalere study found that around 300,000 Medicare beneficiaries with ESRD will become eligible for Medicare Advantage plans.
“Understanding the differences between the MA enrollees and the FFS population will help both health plans and providers better prepare for the 2021 transition,” the Avalere study emphasized. “In addition, understanding what proportion of ESRD patients enrolled in FFS today is likely to enroll in MA in 2021 in specific markets will help assess the impact of the coming change.”
The new enrollees will dramatically change Medicare Advantage plan demographics for beneficiaries with ESRD.
At present, Medicare Advantage beneficiaries with ESRD tend to be around 69 years old, with less than a third of them being younger than 65. A little over one in three of these beneficiaries (36 percent) is dually eligible. Over half are white while only 32 percent are Black or African American.
In contrast, patients with ESRD in fee-for-service models of care tend to be about a decade younger at 60 years of age with a majority of beneficiaries (57 percent) being under the age of 65. Nearly half of them are dually eligible. Racially, the population is fairly split between white and Black with 46 percent of the population being white and 38 percent Black.
“Differences in patient characteristics among ESRD patients enrolled in MA and those in FFS may result in differences in costs, comorbidities, and the types and intensity of services used,” the Avalere study suggested. “Avalere’s analysis did not look at utilization patterns of the 2 groups. However, the differences in the proportion of duals status suggest the underlying costs of the 2 populations may differ.”
As payers brace themselves for higher healthcare spending in 2021, it will be crucial to take these costs into account for Medicare Advantage plans.
June 25, 2020