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Investor money and venture capital funding is pouring into Medicare Advantage (MA) plans. Enrollment in MA plans has more than doubled from 12 million members in 2011 to 26 million in 2021. What does this mean for us and our patients? Do these plans deliver better care for vulnerable older adults? Or are they a money making machine driving up healthcare costs in the name of profit? 

On today’s podcast, we are joined by UCSF geriatrics fellow Alex Kazberouk to talk with Dr. Don Berwick (founder of the Institute for Healthcare Improvement, former administrator of Center for Medicare and Medicaid Services) and Dr. Richard Gilfillan (former CEO of Geisinger Health Plan and Director of the Center for Medicare and Medicaid Innovation). Their recent two part post on the Health Affairs Blog about the Medicare “Money Machine” has stirred up a debate about challenges and misaligned incentives within Medicare Advantage.

We talk about:

  1. What Medicare Advantage is all about – its history, operations, potential benefits, and what it means for us and our patients
  2. Rick and Don’s Health Affairs post on the downsides of MA plans and the Medicare “Money Machine”
  3. Policy solutions to improve the system without throwing the baby out with the bathwater

We also touch upon prior podcast topics such as the area deprivation index and population health. As a special, Alex plays a superb rendition of this song which is definitely not a Rickroll.

This is part one of a two part series on Medicare Advantage and healthcare financing. We have a follow-up with Claire Ankuda and Cheryl Philips on Special Needs Plans and the Medicare Advantage Hospice Carve-In coming soon.

Eric: Welcome to the GeriPal Podcast! This is Eric Widera.

Alex: This is Alex Smith.

Eric: And Alex, who do we have with us today?

Alex: We’re delighted to welcome Rick Gilfillan, who’s a family doc. Welcome to the GeriPal Podcast, Rick.

Rick: Great to be with you. Thanks for the opportunity, Alex.

Alex: We’re also delighted to welcome Don Berwick, who’s a pediatrician and Senior Fellow at the Institute for Healthcare Improvement, and former administrator at the Centers for Medicare and Medicaid Services. Welcome to the GeriPal Podcast, Don.

Don: Nice to be with you, Alex. Thank you.

Alex: And joining us as a co-host, we have Alex Kazberouk, who’s a Geriatrics Fellow at UCSF. Welcome to the GeriPal Podcast, Alex K.

Alex Kazberouk: Thank you so much, Alex S.

Eric: We are super-excited to talk about this. Basically it came from Don and Rick’s Health Affairs blog post on Medicare Advantage direct contracting and the Medicare money machine.

Eric: We got a lot to unpack there. But before we do all of that, we always start off with a song. Does anybody have a song request for Alex?

Rick: I do. Alex, could we do Never Going to Give You Up by Rick Astley?

Alex: And why?

Eric: Why you rickrolling us?

Alex Kazberouk: I think the song really speaks to the idealized relationship between a Medicare Advantage plan and a patient that may or may not exist in practice. And the podcast has not yet been rickrolled, as far as I know.

Alex: That’s good. Yeah. “Never going to say goodbye. Never going to tell a lie and hurt you,” right? Those are the lyrics.

Alex: Also, I would add a great song that appeared in Ted Lasso in this last season was featured, strangely enough, in a funeral scene. So here we go. Just a little bit of Never Going to Give You Up by Rick Astley. Here we go.

Alex: (singing)

Eric: Does that count as a rickroll, Alex? Or do we actually have to link to him playing this song? [laughter]

Alex: I don’t know.

Eric: I’ve got to understand my internet memes.

Alex Kazberouk: I think it counts, especially if somebody was not expecting it. So I think it counts. [laughter]

Eric: So let’s jump into this topic. I got to say, Rick and Don, whenever I see stuff about ACOs and Medicare Advantage plans and MSPs, part of my brain shuts off. I just have difficulty understanding a lot of what’s said. I think I’ve read your Health Affairs blog posts three times, and I’m still trying to piece out everything. Because, yeah, maybe it’s just me. My brain doesn’t work very well.

Eric: But maybe we can take a step back; would either of you be willing to just break down: What are we talking about when we say a Medicare Advantage plan? And how does it differ from other things like HMOs, ACOs, Medicare?

Don: As befits my age, let me start with the history, then turn it over to someone that actually knows what’s going on, which is Rick.

Don: Back in the day, Medicare, which covers people over 65, was set up in 1965. It’s part of the Great Society, and it was government insurance, at that time mainly for hospital care for older people.

Don: It simply bought care on the open market, which meant you paid doctors to see patients, you paid hospitals to admit them and day charges. It was just fee-for-service medicine now covered by a government insurer, which was a great step forward.

Don: But as the ’60s and ’70s and ’80s rolled on, it became clear that costs were rising over fast. And that the fee-for-service payment system of what’s called traditional Medicare had some problems. Which it didn’t have a way to control costs, and it didn’t have a way to organize care.

Don: That was the era when some of the more famous HMOs: Kaiser Permanente, for example, or Group Health Cooperative, or Puget Sound, or Harvard Community Health Plan, were starting.

Don: And they were proving that when you had an integrated care system that could get paid on a capitated basis, in advance or on a population basis, that they could do things that the fee-for-service system couldn’t.

Don: They could coordinate care, they can invest in stuff to help patients that there was no way to do in fee for service. And they had an incentive to keep people out of the hospital, which was a good thing.

Don: Because they had to find ways to take care of them and keep them from getting into the hospital in the first place, by preventing deterioration or by helping them get out of the hospital faster and home, where they should be. And they were performing pretty well. Something like 15% less expensive in many cases, and pretty good quality of care.

Don: And so, sensibly, Medicare and the Congress began saying, “Well, how can we give Medicare beneficiaries the benefit of this coordinated care, health maintenance care?” And they decided to have an option in Medicare. It wasn’t called Medicare Advantage at the time.

Don: It was basically, “Gee, Medicare beneficiary, if you want to try to enroll in one of these integrated systems, go ahead. The government will pay the system instead of paying your doctor. Then the insurance system will then take care of you.”

Don: Which was supposed to save money, reduce costs, and make care better. But what pretty quickly happened was not that. That what happened was insurance companies began to offer not necessarily managed care, managed money. And to cut a deal with the government where they get paid to take care of patients. That evolved in the Medicare Advantage system.

Don: The rhetoric is still the same, which is, “Give us the money upfront. We’ll be able to organize care. We can take risk. We can invest where the money should be, and we can do better for patients.”

Don: One of the problems with that is if you just have that deal, then insurance companies would go hunting for the patients who are really well, because they’re not going to cost them anything. They get paid money, they can keep a lot of the money because the patients aren’t going to need a lot of care.

Don: So how could you create a system in which they’ve got an incentive to actually enroll people who really need the care? That requires case mix adjustments, some form of risk adjustments.

Don: So that when you are enrolling someone who has diabetes and congestive heart failure, you get paid more because they’re going to cost more, and you’re avid to enroll. That was the idea. So risk adjustment had to become part of this Medicare Advantage system.

Don: One way to think of it is they’re now two systems. There’s the government is the insurer, traditional Medicare; or the government pays an insurer to take care of a beneficiary.

Don: It started off as a pretty low percentage of beneficiaries; now about, I don’t know, what is it, Rick? It’s about 43, 44%? Something like that of Medicare beneficiaries are in the Medicare Advantage space. They’ve chosen that.

Don: When you turn 65, the government comes to you. And so you [inaudible 00:08:01] the government, say, “I’m ready for Medicare.” They say, “Which would you like? Traditional Medicare or Medicare Advantage?”

Don: That’s how it all came to be. Maybe I’ll turn it over to Rick, if you want to pick up the thread there and explain what happened then with this coding thing, and eventually what Rick is calling the Medicare money machine.

Alex Kazberouk: Yeah. Maybe before getting into coding and the specifics of risk adjustment, what does this look like for a patient or a person coming in? And how does one think about joining one of these MA plans? What is the patient side of things?

Rick: Yeah. Just one point of background I would add to Don’s summary: What had happened over the years from 1985, when they first came up with a privatized program, until now, there have been these cycles of basically Congress ends up paying a little bit more, because the plans find a way to get the healthy people. So it ends up costing more than they would cost in fee-for-service.

Rick: Congress cuts rates, they start losing membership, so the membership goes down. Then Congress changes the rules, they get more money, and they start growing again.

Rick: So there have been multiple cycles that are expanding and shrinking over time. Each time more money has been put into it so that over the 35 years since it was started, it has never cost less. It’s always cost more than the fee-for-service system, for different reasons.

Rick: From an individual’s selecting standpoint: it’s end of October, beginning of November, it’s open enrollment season. I’m a Medicare person. I can look at the enrollment stuff. It’s just like when you have open enrollment when you’re employed by somebody. Once a year, you decide who you want coverage with.

Rick: A Medicare enrollee has a couple of choices. They can go with traditional Medicare, and many then also buy what’s called Medicare supplement. That is additional coverage, because Medicare basically covers 80% of your costs with no out-of-pocket max. So you could spend a lot of money.

Rick: So people typically buy supplemental insurance. You buy that through the Blue Cross plan or whomever. Now you have traditional Medicare, and you have Medicare supplemental insurance. That’s typically the package that most people have.

Rick: Some people have Medicaid to cover that. Some people are still employed, so their employer covers it. But basically, that’s called the traditional fee-for-service Medicare side.

Rick: But that person also can say, “I want to look and join a Medicare Advantage plan.” So they look at the marketing and sales materials that are available either online, or maybe they know a broker. Or a broker contacts them and says, “Hey, look at this, consider this.”

Rick: Now they’re looking at a different set of benefits. If Medicare traditional pays 20% of your … I mean, sorry, 80% of your costs … well, with a Medicare Advantage plan, typically the benefits are more like in the employer insurance space. Well, maybe you have a $5, $10 copay to go see the specialist. Maybe you have a co-insurance for the hospital admission. They fiddle with the benefits, so the benefits are different.

Rick: Then as a result of the extra payments that Medicare makes, some of that money is used to provide some extra benefits. The fact is that now, right now they might get part D coverage, which is the drug plan. And on the traditional side, I have to buy drug coverage. So maybe I pay 50, $60 a month to get drug coverage.

Rick: Well, if I’m in the Medicare Advantage space, I may pay only 20 or 30. Or I may pay nothing. So they may get that extra benefit from choosing the Medicare Advantage plan.

Rick: The trade off? Well, the Medicare Advantage plan has typically a narrow network. Virtually every provider in the country is in Medicare fee-for-service, traditional Medicare. If I go to a Medicare Advantage plan, typically I’m going to have a more narrow network.

Rick: Oftentimes as an example, the big cancer hospitals, for instance, are not in the network. Because the MA, the Medicare Advantage plans don’t want to select people with cancer. So the networks are different.

Eric: Rick, can you give me some examples? What are the big MA plans in the U.S.?

Rick: Well, United Healthcare is the biggest. After that, Anthem Blue Cross, which is in 14 states. United is in all states, I believe, 50 states. Anthem is in, I don’t know, 16 or 17, something like that.

Eric: Yeah.

Rick: Then you have Aetna, that’s in virtually all states. Humana is another big one from Kentucky. They’re in a more limited number of states, but they’re another very big plan.

Rick: Then your local Blue Cross plans typically are big providers. The nonprofit Blue plans that are not part of Anthem are big providers. Cigna has some, then there’s a variety of small HMO-type local companies that are in the business. Right now I think- [crosstalk 00:13:03]

Don: These large plans will have several different kinds of MA plans. They don’t have just one vanilla flavor.

Rick: Yeah. It’s gotten very complex. There’s something like a thousand, or more than a thousand different MA plans that are sold across the country. Not a thousand different companies, but more than a thousand flavors.

Eric: And you said we’ve been in cycles before a lot of people, less people-

Rick: Yeah.

Eric: It sounds like over the last decade, there’s been a very rapid growth in the population of older adults served by MA plans. I think in 2011, one in five Medicare decedents were under Medicare Advantage. Now in 2018, I think the last one I saw, was one out of three are in Medicare Advantage. Is that what we’re seeing, this trend?

Rick: Yeah. Beneficiaries. Right now, as Don says, about 42%.

Rick: It’s been a steady uphill climb, I think, pretty much since 2006, when risk adjustment went live and the entire model was active.

Rick: Since then, what happens is because risk adjusting ends up giving them extra money above fee-for-service, that extra money can be used to either add improved benefits, or reduce premium cost to the beneficiary. So the products have become more and more attractive over the last 15 years to beneficiaries.

Don: It’s a very weird market. Rick has called it a perverse market. If you think about it, the plans can offer higher benefits and lower premiums. The beneficiary’s not paying for those, but someone is. That’s coming from the government trust fund, or in some cases, from essentially transfers from traditional Medicare.

Don: It’s a great deal. I mean, someone else pays and you get a better product or you get a lower cost. So obviously, that favors growth. Plus, there’s much more marketing of the MA plans. They put a lot of money and effort into marketing.

Don: If you’re my age and you open your mail any day, you’re going to have three envelopes from some plan trying to sell you on moving into MA. It’s a weird market, and it has grown.

Rick: One point I should add to Alex’s point: The other impact on the patient is the trade off is some more benefits for a narrower network. And putting up with all the hassles that go with medical management.

Rick: “Oh, you want to have a stress test? Okay, well, we’ll schedule it in a week because we got to get it pre-certified.” Or, “You want to have your gall bladder out? Well, we’ll see if we approve it.”

Rick: So there’s all that medical management is the other part that a patient thinks about when they try and make a decision about what insurance to get.

Alex Kazberouk: So if I’m a patient or recommending this to my patient, it seems like it might be a good deal. I get to pay less money, I get extra benefits, sometimes drug coverage. In some cases, maybe vision or even dental, to an extent. What is the data on outcomes? Do people in MA plans do better? Do they live longer?

Rick: The answer is, I think it’s fair to say, there’s an organization called MedPAC. They are the Medicare Payment Advisory Council … or Commission, sorry.

Rick: They are basically the advisors to Congress on what to do with the Medicare program. They’re probably the most intensive evaluations of everything Medicare of anybody out there, I would say.

Rick: They would say, basically, you really can’t say very much about the quality differences between Medicare traditional and Medicare fee-for-service. If you ask the Medicare Advantage folks, they’d say, “Oh my God, we got all sorts of evidence about we’re much better.”

Rick: The reality is that the evidence is pretty thin. Some of it is incomparability of statistics gathered in the two marketplaces. There’s not a lot of the same data.

Rick: From a mortality standpoint, the interesting thing is people who stay in Medicare tend to be the sicker population. The latest data on mortality is that people in Medicare Advantage, they do have lower mortality rates.

Rick: The reason is because the sicker people stay in Medicare. And sicker people go from Medicare Advantage back into Medicare if they want to get access to hospitals that they don’t have on the Medicare side if they have a problem.

Rick: So typically what research shows is that the initial mortality rates are lower in Medicare Advantage due to that. But over time; I think it is three to five years; they become the same as in Medicare Advantage … no, Medicare fee-for-service.

Rick: So there’s no evidence of better outcomes, I think I would say. Maybe they do better with breast cancer screening and colorectal screening and stuff. There’s some evidence of that. But by and large, there’s not a whole lot of difference from the quality perspective.

Don: And this is confounded by the coding stuff we’ll get to. Because the coding game is leading the Medicare Advantage plans to code a lot of diagnoses that are not coded on the traditional side.

Don: When you try to compare outcomes, you haven’t got apples to apples. You’ve got one group that’s been upcoded to Medicare Advantage to look sicker. Therefore, the bar has been lowered to making their outcomes look better. So it’s really, really hard to evaluate this stuff.

Don: We trust MedPAC a lot. They’re very diligent. And a lot of the evaluations, evaluators that have shown some advantage to Medicare Advantage, have been hired by Medicare Advantage to do the evaluation.

Don: I don’t know. I’d be cautious about saying we really know that they’re better.

Eric: Let’s talk about that coding. When I think of coding, like you have a 76-year-old with hypertension, osteoporosis, some mild COPD. You got some objective data. You got a diagnosis. Where is the gamification of that? Because it is what it is, right?

Eric: You have the diagnoses, assign a code, and then everybody should be playing in the same level playing field.

Rick: Yeah. Well, let’s step back for a moment and put yourself in primary care private practice. You’re seeing any patient; it doesn’t matter if they’re Medicare, not Medicare.

Rick: You submit a claim, because you want to get paid. To get paid, you need a diagnosis. So I submit a diagnosis; osteoporosis, let’s say. And now I get paid, I get my office to be paid. I don’t worry about finding 15 codes to put on the claim; I just put one claim on it. So that claim goes into the Medicare database.

Rick: By definition, the traditional fee-for-service database is undercoded. It doesn’t have all the codes that one could find if you diligently sought every possible diagnosis, old and new.

Rick: Now Medicare says, “I got to create a risk adjustment system, and I’m going to allocate the cost of this population of people. I’m going to allocate that cost across their diagnosis. And I’m going to figure out how much is osteoporosis worth? Maybe it costs a thousand dollars more in my Medicare service population.”

Rick: So I take basically all the dollars I spend, the entire dollar amount I spend, and I divide it by the number of diagnosis codes, which are rolled up into categories called Hierarchical Condition Categories, HCCs. There’s like a hundred of them. They’re kind of like DRGs almost, but for outpatient stuff. And you say, “Okay, these are diagnosis categories.”

Rick: Well, in the fee-for-service world, the denominator, the number of HCCs, is smaller because I don’t submit a lot of codes. So if I divide that small number into my total cost for the population, I might find that on average, everybody has two HCCs that are worth $2,000 each. And if I put a demographic factor in, that accounts for the rest of their cost.

Rick: So now on average, I have all these HCCs and I value them at $2,000 for every HCC, on average. Now, if I go over to Medicare Advantage, I take the same people, I’ve converted them to Medicare Advantage, the same people. They have the same total cost. And I calculate their traditional Medicare cost per diagnosis per HCC. And I use that number to calculate how much they’re going to cost in Medicare Advantage.

Rick: The one difference is I now have the ability and a reason to get every diagnosis I can get. I still get $2,000 per diagnosis, but if I can collect twice as many diagnoses, twice as many HCCs, I get paid twice as much.

Rick: That’s the reason why you hear from people complaining, “My God, they want me to put down amputation was 10 years ago. And they want me to put down, diabetes with this kind of complication, not just plain diabetes.” Because that is the hunt for more and more HCC codes.

Rick: So the HCC codes are based on fewer diagnoses. Therefore, each one is worth more. Now in the MA world, I go out and I get as many diagnoses. Is that clear?

Alex Kazberouk: Yeah. Yeah. Why is that necessarily a bad thing? You can make the case that, “Okay, if the patient does have all of these conditions, it’s actually good to accurately document all of them.”

Rick: Oh, accurately document’s a wonderful thing. Yeah. But the problem is, doing what I described as not fraud. The problem is that the dollar amounts associated with HCCs, each HCC is wrong. It should be much less in this population. Because the same people cost the same amount of money. If they cost $10,000 a year in fee-for-service, they’re going to cost roughly $10,000 a year in the Medicare Advantage space.

Rick: The catch is I’m overpaying, because the dollar amount associated with that diagnosis is not based on me having all the codes. It’s based on me having too few codes. The overpayment is created by me getting a lot more codes paid at an inflated amount. It’s not fraud. It’s just smart business practice.

Don: The way I think about it is if back on the traditional side, the patients were getting their care. I might not have written down every code the patient has, but they’re getting their care.

Don: When I move over to the Medicare Advantage space, now every time I add a code, I get more money. But that doesn’t mean the healthcare costs have gone up. That’s the same patient, identical patient. We’re just adding more money based on the codes.

Don: That doesn’t translate to actually different costs for caring for that patient. It doesn’t have anything to do with that.

Eric: It reminds me of a quote I once heard from a really smart person. “Every system is perfectly designed to get the result that it gets.” Some guy named Don.

Eric: But I’m going to your blog post now Some of these MA plans are also using, what, artificial intelligence and creating systems to help really increase the coding of this?

Don: Yeah. There’s no bad way to find a code. Any way you can find a code, do it with AI, do it with a nurse visiting home, do it by asking the patient a lot of questions.

Rick: Yeah. Or take your example. You said the typical patient, what; they had osteoporosis, hypertension, maybe a little COPD, right?

Don: Yeah.

Rick: She’s sitting in front of you right now. And you got a note from your MA plan. They said, “Your patient has a 50% chance of having carotid atherosclerosis. Do an ultrasound on her carotids and see if she has asymptomatic … So now you order an ultrasound, right?

Eric: Oh no.

Rick: And she’s got, yeah, asymptomatic carotid plaque. Well, you’re hopefully not going to do anything. But you go put the diagnosis down, so you get $2,600 a year more to your insurance company.

Eric: Oh …

Rick: You got it?

Eric: I get it now.

Don: That case is, Rick and I have written about it. I was vice chair of the Preventive Services Taskforce. Current task force guidance is carotid artery screening gets a D, which means there’s substantial evidence against doing it.

Don: It’s not just we don’t know; it’s we know not to do it. Yet on the MA side, you do it, you get paid, 2,600 out, or it’s … very perverse.

Rick: Right. Then now you’re a nurse out doing the home visit. I mean, literally hundreds of thousands of nursing home visits are being done.

Don: Nurse home visits.

Rick: Nurse home visits. Sorry, yeah. Yeah. You go in and what are they equipped with? Well, they got a little diagnostic kit. Does a little peripheral vascular screen. So you’ve got cold feet, seriously. And basically on everybody, they do this peripheral vascular exam, because now they can document peripheral vascular disease.

Rick: If they get such-and-such a reading on the ultrasound or whatever the digital readout is from; I guess it’s something on the toe, whatever. So that’s what happens.

Rick: When we wrote the article, we talked about three ways to get more codes. I need more codes for the reasons we’ve described. How do you get them?

Rick: One, just pay the doctor more. You give them a metric and say, “Look, I’m going to track how many codes you get. And if you get all the codes I tell you are there to be gotten, I’ll give you more money.” That’s one way to do it.

Rick: The single largest use of AI machine language … I’m sorry, machine learning, is to do this because it’s so lucrative. So that’s one way to do it.

Rick: The second way they do it is they basically say to you, “Now, Doctor, I’m going to give you a deal. I’m going to give you a risk deal. And I’m going to put you at risk for the total cost of care for that population. That’s a thousand dollars per person per month. And if you can beat my target of $850, 85%, then you can keep the difference.”

Rick: But hey, suppose you just do that ultrasound on everybody and increase the premium by $2,600? Now your target stays the same, but your premium has gone up by that $2,600. That’s about $200 per person per month. 12 times $200 is $2,400.

Rick: Well, if I do that, now I’m the doctor. If I have that deal that they gave me, now the premium goes way up. And I get 85% of the premium in my target. So all that extra money becomes my incentive payment.

Rick: Ordinarily, a primary care doc gets $40 per member per month for providing care. Suddenly, they’re getting $240 per person per month. That’s an enormous amount of money that they’ve gotten.

Rick: And that’s the money machine, the ability to submit those codes and generate that money. It all just drops right through into incentive payment for me, the geriatrician.

Alex Kazberouk: I mean, if you’re a geriatrician or primary care doctor, that doesn’t sound too bad. Primary care in this country is underfunded, what, four to 5% of total spend.

Alex Kazberouk: And now you’re saying, “Hey, if I do these things, some of which are maybe not useful, but some of them, who knows? Maybe having that nurse come by once in a while to do silly things, there is benefit to it.”

Alex Kazberouk: Pivoting a little bit from the insurance side of things, I know there are all these startups.

Rick: Yeah.

Alex Kazberouk: Oak Streets, Iora, others that you write about.

Rick: Yeah.

Alex Kazberouk: That try to do this and try to say, “Look, we will partner with MA plans and we will try to do more services sometimes for our patients.” What’s the goal there, and what are the issues?

Rick: The goal there is, look: They see the patient more, and that’s a good thing. That probably is a good thing, hopefully it’s a good thing.

Rick: I mean, some of them see a patient every month to be sure to get every possible code, get their scores from one up to 1.7 and collect 70% more premium. Enormous amounts of money.

Rick: As a primary care doc, on average, you’re making $240,000. You get your scores up to 1.3, you’re making a million. It’s not like a little bit more money for primary care, or for primary care practices. It’s four times the amount of money that you’re getting.

Rick: Basically, that’s the game that they’re trying to pursue, and they’re really good at it. They’ve got these AI tools that say, “Mrs. Jones, she’s got this. She got that. I bet she’s got that; check for it.”

Rick: So the answer is the for-profit companies now are basically generating that revenue. Not much of it is going necessarily to the primary care doc. It’s going to the organization, which is ultimately going to shareholders and stockholders, presumably as profits, dividends, stock buybacks, whatever.

Don: Let me play with Alex’s question a little more, Rick, and see what you think.

Rick: Yeah.

Don: First, the last point Rick made. The three deals, the money machine that we see, one is pay the doc to code more. That’s the AI machine learning piece; just, “We’ll pay you 30 extra bucks if you use our software to find an extra code on a visit.”

Don: The second is do the percenter premium sharing with the docs, which is a little more complicated, but it’s very lucrative.

Don: The third is buy the docs. That’s why United is now the largest single employer of physicians. Why not own the whole game? If the game’s so lucrative, why give that money back to the provision of care? Let’s keep it.

Don: But your question is deep because it is true. If you look at, say, Iora, which is one of the ones that I’ve known for many years, there are innovations there.

Don: There’s no question that some of these plans have done some wonderful things in inventing new approaches to care. Low panel sizes, and really intensive monitoring of patients. ChenMed’s famous for that, Iora does that, flexibility and benefits.

Don: In Iora, if you need a taxi to take you home or to see the doctor, you get a taxi. They don’t need quibble about that. A lot of integrated care with mental health and social work, all these are innovations that come out of the managed care world.

Don: The question I have is, well, what toll do we have to pay for that? Isn’t there a way to finance care at 18% of GDP or less, that gives that kind of flexibility to people to give care?

Don: But without the 15% toll that the insurance companies take out of an MA, without putting barriers in front of patients and pre-certification and reviews and delays?

Don: Do we really have to pay this excess price through MA? I think, “No.” The MA plans say, “Oh yes you do. Now that’s how we actually get the care of the future invented.”

Don: But I dispute that MA is the font of innovation and the kind of reconfiguration of care that your question’s about, Alex.

Don: There’s a baby in this bath water; there’s no question. But I say, get rid of the bath water. Let’s figure out smarter ways to support inventive care. Rick, I don’t know if you see it the same way I do.

Rick: Yeah. Well, yeah, I do. And I think let’s go back a moment. Say, what is this ACO thing that gives you a headache? Yeah. Let’s go back. Remember traditional Medicare? In traditional Medicare, what we said was … this goes back to like 2010.

Rick: I was at the Innovation Center, working for Don at CMS. And this whole idea of ACOs, Accountable Care Organizations; that’s in the traditional Medicare side.

Rick: What we said was, “Maybe if we create a contract with a group of doctors who will commit to managing that care like those HMOs did, just maybe they can save money too. And we’ll create a program where if there are savings, they will get it.

Rick: “Oh, and by the way, we won’t give them the easy money, the risk coding. We give them a little bit of a margin, like 3% they could go up, opposed to the 30, 40, 50, 60% the other guys are doing. And [inaudible 00:35:05] can go up and go down.”

Rick: Basically, that was the idea of ACOs. That’s what an ACO is. Primary care doctors, we say, “Okay, we’ll figure out what Medicare people you’re seeing. We’ll assign them to you or align them with you. And we’ll give you a total cost-of-care target, based on the historical experience. If you can save money, you can [inaudible 00:35:28].”

Rick: That’s the ACO side of this. That’s saying, “Let’s go directly to the providers and do it, and basically not pay the 15% we pay the insurance.” So how much good can they do? That’s what’s been going on as an experiment for the last 10 years.

Rick: But one of the problems with the MA is because the money’s so easy, they basically pull people away from doing that well, frankly. And we didn’t make the deal as attractive as we probably should have at this point. And so people aren’t investing that much in that ACO care model.

Rick: The results have been, oh, on average, a couple of percent better in terms of saving money. There’s been savings, and people have made some money. But it hasn’t been as much as we would’ve liked. But that’s the comparison, if you will, until last year, that was relevant: ACOs versus MA, and how are they doing?

Eric: Can I ask: You did two parts to your Health Affairs blog post; we’ll have a link to it on our Show Notes.

Eric: The second part was really talking about a back door towards privatizing Medicare. I want to be mindful of the time; we only have about 10 minutes left. Can you give the viewers just a brief description of what was part two about? What is this back door that you’re talking about?

Rick: Yeah. Well, that was the ACO model. That was a direct contract between CMS and providers; be they doctors or doctors and hospitals, whatever.

Don: The traditional side; that’s the traditional Medicare, now trying to figure out a way to help doctors be more inventive with the money.

Rick: Right. So then, the Trump administration was interested in just privatizing the whole thing. I mean, they said that explicitly, basically wanted to get CMS out of the way and give all the money to the private sector.

Rick: So they created a couple versions of what they called … originally it was called Direct Provider Contracting. They struck the provider out of it and made it direct contracting, because they wanted to get the for-profit companies, the insurers involved in some of these startups.

Rick: They call that direct contracting, and they took the ACO model, which was limited to providers, and said, “Oh, we’ll make that available to insurance companies. And, we’ll give them the opportunity to get that same kind of a capitation check they get in MA for the total cost of care. And we’ll do a variety of other things to make it a little bit easier for them to be successful versus the [inaudible].”

Rick: So that was like the back door. There were several versions of it. The one that is operating is called Direct Contracting Global Professional Model.

Rick: Basically, there are about 53 entities. 28 of them are these for-profit driven insurers and/or MA-focused firms. And they said, “Let’s get the firms that are really doing business MA only, and get them to come over into this traditional side.”

Rick: So when we say the back door to privatization, it’s just getting those same MA-style players into the traditional book of business.

Don: The other side of this is more about beneficiaries. I’m a Medicare beneficiary, and each year I get to choose whether to be in traditional Medicare or Medicare Advantage.

Don: I chose traditional Medicare. I want the flexibility of not being in a limited network. And I have some concerns about behaviors of some of the MA plans. So I chose traditional Medicare explicitly, as does any other beneficiary in traditional Medicare.

Don: The direct contracting model proposes to basically put me in a Medicare-like Advantage model. I have the opt out, and there’s less restriction on where I can go. It’s a little more open.

Don: But suddenly, I who chose the traditional route, find myself in an MA-like situation. That’s part of the concern about the direct contracting model.

Alex Kazberouk: Interesting. This is complicated.

Don: It is complicated.

Alex Kazberouk: It is challenging to make many changes all at once. If there was a magic wand or a way to make a significant change to one or two things; no more than that; Don, what would that one or two thing be? And then same to Rick?

Don: To build on the ACO direction. I think we ought to be heading toward a direct provider contracting model, like the ACO. And more and more make the payment be literally global payments, or population-based payments, to providers of care without the insurance company in the middle. And certainly without venture capital firms in the middle.

Don: To do that, we need a way to support practices, to take the risk and manage care. But I think we could do that without all the tolls of MA, and the tie the Medicare Advantage.

Don: At this point, Medicare Advantage exists, and it’s not going to go away; doesn’t look like it. So the other part of my plan would be to change the coding model.

Don: The Medicare Advantage plans still have risk-coded patients, but those patients are coded according to the actual risk they have. Do they live in areas of deprivation? Are they people very likely to be ill? And do the adjustment based on their real needs of the population, not just how clever the coding system can be.

Alex: Last question from me: You’ve described this as a Medicare gold rush. And there’s been great investment by venture capitalists and others. I just wonder if you could say a little bit about that.

Rick: Yeah. The money machine is what we described as what turns these primary care practices, or MA plans, into very valuable commodities.

Rick: So what happens? Well, Wall Street sees these as growth opportunities. Oh my God, Medicare is now spending coming up on 900 billion a year. It’s going to go to 1.5 trillion a year. There’s no other industry that’s going to grow like that. I mean, it’s a lot of money.

Rick: What happens is you get initial investors first, investing in one or two of these models. And you start getting this frothy storyline that people tell about how much money they make. By the way, all of them tell the risk-coding story, albeit a little bit camouflaged. But it’s there.

Rick: And then you say, “Oh, by the way, direct contracting. Now if MA was only 50%, now I got the whole hundred percent of 1.5 trillion in place.”

Rick: So all these guys rushed to do an IPO or to do a spec. And sequentially, each valuation went up higher and higher and higher.

Rick: If historically, MA, Medicare Advantage plans, were valued based on how many members they have, dollars per member, it was 4,000. Then it went up a little bit, to eight, nine, 10,000. Suddenly, now we got people who are up over a hundred thousand dollars per person.

Alex: Wow.

Rick: Because the money machine opportunity, so far, it hasn’t hit a limit, right?

Alex: Mm-hmm (affirmative).

Rick: Right now, risk scores are increasing 2% a year faster in Medicare Advantage than what happens with the traditional aging population.

Rick: That’s projected to $600 billion in excess payments over the next eight years.

Alex: Mm-hmm (affirmative).

Eric: And Rick, our magic wand had a little bit of leftover energy. Do you want to do anything else from your magic wand? What would you do to change this?

Rick: Oh, oh, I’m sorry. Well, I think I would agree with what Don said. I think it’s also the reality is that yeah, we need to pay primary care docs more. But we should not have contracts that allow people to control the premium to make more profit.

Rick: I think CMS and Congress need to create rules around limiting the amount of incentives that can be driven by the money machine model. I would much rather CMS get a different model entirely, as Don said, that’s based on demographics, social deprivation index.

Eric: Yeah.

Rick: And some surveys of beneficiaries to find out their illnesses. But I think also we want to make sure that we don’t allow this kind of basically corporatization of primary care, which is what’s happening, unfortunately right now, because of this excess profits that are being driven.

Eric: Well, I want thank both of you, just because we brought up Area Deprivation Index. We also did a great podcast with Amy Kind on the Neighborhood Area Deprivation Index.

Rick: You did? Good.

Eric: I also want to say, this is part one of a two-part series on MA plans. We’ll have Cheryl Phillips, President of Special Needs Plan Alliance, and Claire Ankuda, who is a health service researcher focused on hospice care and MA plans.

Rick: Yeah. Great.

Eric: One more: If I want to pretend I’m a good interviewer for that next podcast, would there be one question that you guys would have around hospice and MA plans, or the Special Need Plan Alliance for Cheryl Phillips and Claire?

Rick: Bring your risk scores, and show me the trend on your risk scores. Yeah.

Eric: Oh yeah. How about for you, Don? One question that we should ask them?

Don: If you wanted to get paid the best way to do the best for your patients, how would that be compared to what it is today?

Eric: Great. Well, we promise that our next podcast is not just going to be a rickroll, but we’ll end on a little rickroll. Alex?

Alex: (singing)

Rick: Nice.

Don: Well done.

Eric: Well, Don, Rick and Alex, big thank you for joining us on this GeriPal Podcast. I know your days are busy. I got to say though, my mental blockage on MA plans is slowly dissolving. I understand a little bit better.

Eric: And for God’s sakes, I’m an academic geriatrician and palliative care doctor. And I have difficulty with this. I think you guys did a good job of really distilling it down. So a very big thank you.

Don: Thanks for letting us try.

Rick: Thanks for the opportunity. Enjoyed it.

Eric: And a very big thank you to Archstone Foundation for your continued support, and to all of our listeners for supporting us.

Eric: For those who are supporting us on the GeriPal donation site to continue this podcast, including Meg Wallhagen, who is one of our generous donors. Thank you everybody.

Rick: Hey Eric, we should say also that our thanks and admiration go out to you and the entire team at UCSF, and the care you’re giving during the incredible two years we’ve had with COVID. So, well done.

Eric: Well, thank you very much. It’s been a heck of a two years.

Don: Yeah. Thanks for everything you’re doing.

Alex: Thank you.

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