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The Case For Greater Focus On Innovation In Medicare Advantage

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The Center for Medicare & Medicaid Innovation (the Innovation Center) was chartered by section 3021 of the Affordable Care Act. Its purpose was to streamline the implementation of new payment and delivery models by giving the Centers for Medicare & Medicare Services (CMS) Innovation Center, a renewing $10B Congressional budget allocation every 10 years to test new models and the authority to scale successful pilots. When the Innovation Center was created in 2010, it was expected to usher in an accelerated era of payment delivery reform in the United States.

Since that time, the Innovation Center’s record could be described as mixed at-best. The Center could scale any model that is actuarially certified as improving quality and reducing costs, but only a handful of models have been certified. Importantly, the portfolio has been narrowed in scope, focusing initially on models that would improve coordination of care in the Fee-for-Service (FFS) Medicare program. With roughly 50% of Medicare beneficiaries now in the Medicare Advantage (MA) program, it has been under-represented in the government’s innovation portfolio—with only the MA Value-Based Insurance Design (VBID) model as a notable exception.

The reasons for this under-representation are likely manifold.

First, at the time of the Center’s creation (when I was a part of the founding team), MA was less prominent than it is today with only 25% of beneficiaries seeking to receive their Medicare benefits from private health plans in 2010. Since then, the MA program has soared in popularity as a greater number of Medicare beneficiaries are choosing MA’s richer benefits offerings and more predictable costs.

Second, there has long been an unmistakable bias against MA, formerly known as Part C: Medicare+Choice. In its earliest implementation in the late 1990s, the program suffered from fraud, waste, and abuse as well as questionable marketing and benefit design practices. As a result, the federal policy analysts and political officials who set the Innovation Center agenda viewed it as a marginal program that was inferior to FFS Medicare.

However, with the current growth of the MA program—and increasing political attention to its flaws—demand that the Innovation Center pay more attention to innovations to MA that will improve the quality of care and reduce costs. Given the MA program’s significant popularity in poor, marginalized, and minority communities, an Innovation Center agenda focused on MA is consistent with the Biden Administration’s stated interest in advancing health equity.

Enhanced Innovation Center focus on MA could focus on new solutions to address the set of acknowledged challenges with the program.

One set of models could focus on introducing new ways of identifying and rewarding risk that leverage data and real-time adjudication. Currently, CMS reimburses MA plans for serving sick patients through the hierarchical condition category (HCC) coding system. An appropriate risk adjustment system is necessary to make sure that health plans are incentivized to seek and serve the sickest patients. However, the system is subject to “gaming” and overpays for some patients and underpays for other patients. The Innovation Center could test new ways of evaluating and rewarding risk that leverage real-time adjudication and machine learning. These new approaches could help reduce fraud, waste, and abuse and create greater sustainability for the Medicare program.

A second set of models could focus on new methods of quality measurement and modernizing the Star Ratings program. The Star Ratings program presently provides reputation and financial rewards to health plans that provide higher levels of service and clinical quality to health plan members. However, the Star Ratings program focuses on a discrete set of preventative measures and health plan experience scores—and could do more to focus on true quality of care and health equity. One of the emerging areas of concern for beneficiaries in MA plans has been the use of aggressive utilization management practices. The Innovation Center could test a new Star Ratings program that introduces a set of “Medicare Advantage never-events” to ensure that health plans are delivering on the promise of coordinating care and not cutting corners to achieve their financial goals. It could also test a new “improvement factor,” that rewards MA plans for reducing disparities among underserved populations.

A third set of models could focus on special populations presently underserved by the Medicare program. While CMS offers Special Needs Plans (SNPs), there are opportunities to enhance the existing portfolio of SNPs, while also testing additional plans. For example, CMS has a dementia SNP whose design has limited its enrollment and popularity, while the demographic headwinds demand more focus on this population. In addition, there could be benefit from a health plan that focuses on addressing the growing needs of older and disabled adults who experience homelessness. Older adults would benefit richly from the creation of new MA health plan models that are specifically targeted on populations underserved by FFS Medicare and the existing set of MA offerings.

A fourth set of models could focus on new sales and distribution models that leverage MA brokers to encourage more health management and healthcare prevention. Increasing scrutiny has been applied to deceptive marketing practices by MA brokers, most recently with a Senate Finance committee probe led by Chairman Ron Wyden (OR) and the call from US Representatives Mark Pocan (WI-02) and Ro Khanna (CA-17) to prohibit insurers from using “Medicare” in advertisements. Brokers in MA receive an upfront commission, as well as a lifetime annual “tail payment” for every beneficiary they enroll in a plan. The best brokers earn this tail payment by providing continuing care coordination and navigation for beneficiaries. There may be opportunities to modify the nature of the payments to brokers to enhance their roles as community health workers, care navigators, and health advocates on behalf of the beneficiaries they serve while improving the quality of care and service in the process.

Unfortunately, the federal debate on MA has devolved into an overly simplistic academic discourse on whether outcomes and cost are better or worse in MA versus FFS Medicare. While this debate continues to unfold and is important, the people have spoken. As of 1/1/23, more than half of Medicare beneficiaries will elect to receive their Medicare coverage through privately administered MA plans rather than through FFS Medicare. The need for innovation in the program has never been more urgent or more relevant.

CMS and the Innovation Center must continue its work on behalf of all beneficiaries and rapidly accelerate the work of improving its administration of the MA program.


The Center for Medicare & Medicaid Innovation (the Innovation Center) was chartered by section 3021 of the Affordable Care Act. Its purpose was to streamline the implementation of new payment and delivery models by giving the Centers for Medicare & Medicare Services (CMS) Innovation Center, a renewing $10B Congressional budget allocation every 10 years to test new models and the authority to scale successful pilots. When the Innovation Center was created in 2010, it was expected to usher in an accelerated era of payment delivery reform in the United States.

Since that time, the Innovation Center’s record could be described as mixed at-best. The Center could scale any model that is actuarially certified as improving quality and reducing costs, but only a handful of models have been certified. Importantly, the portfolio has been narrowed in scope, focusing initially on models that would improve coordination of care in the Fee-for-Service (FFS) Medicare program. With roughly 50% of Medicare beneficiaries now in the Medicare Advantage (MA) program, it has been under-represented in the government’s innovation portfolio—with only the MA Value-Based Insurance Design (VBID) model as a notable exception.

The reasons for this under-representation are likely manifold.

First, at the time of the Center’s creation (when I was a part of the founding team), MA was less prominent than it is today with only 25% of beneficiaries seeking to receive their Medicare benefits from private health plans in 2010. Since then, the MA program has soared in popularity as a greater number of Medicare beneficiaries are choosing MA’s richer benefits offerings and more predictable costs.

Second, there has long been an unmistakable bias against MA, formerly known as Part C: Medicare+Choice. In its earliest implementation in the late 1990s, the program suffered from fraud, waste, and abuse as well as questionable marketing and benefit design practices. As a result, the federal policy analysts and political officials who set the Innovation Center agenda viewed it as a marginal program that was inferior to FFS Medicare.

However, with the current growth of the MA program—and increasing political attention to its flaws—demand that the Innovation Center pay more attention to innovations to MA that will improve the quality of care and reduce costs. Given the MA program’s significant popularity in poor, marginalized, and minority communities, an Innovation Center agenda focused on MA is consistent with the Biden Administration’s stated interest in advancing health equity.

Enhanced Innovation Center focus on MA could focus on new solutions to address the set of acknowledged challenges with the program.

One set of models could focus on introducing new ways of identifying and rewarding risk that leverage data and real-time adjudication. Currently, CMS reimburses MA plans for serving sick patients through the hierarchical condition category (HCC) coding system. An appropriate risk adjustment system is necessary to make sure that health plans are incentivized to seek and serve the sickest patients. However, the system is subject to “gaming” and overpays for some patients and underpays for other patients. The Innovation Center could test new ways of evaluating and rewarding risk that leverage real-time adjudication and machine learning. These new approaches could help reduce fraud, waste, and abuse and create greater sustainability for the Medicare program.

A second set of models could focus on new methods of quality measurement and modernizing the Star Ratings program. The Star Ratings program presently provides reputation and financial rewards to health plans that provide higher levels of service and clinical quality to health plan members. However, the Star Ratings program focuses on a discrete set of preventative measures and health plan experience scores—and could do more to focus on true quality of care and health equity. One of the emerging areas of concern for beneficiaries in MA plans has been the use of aggressive utilization management practices. The Innovation Center could test a new Star Ratings program that introduces a set of “Medicare Advantage never-events” to ensure that health plans are delivering on the promise of coordinating care and not cutting corners to achieve their financial goals. It could also test a new “improvement factor,” that rewards MA plans for reducing disparities among underserved populations.

A third set of models could focus on special populations presently underserved by the Medicare program. While CMS offers Special Needs Plans (SNPs), there are opportunities to enhance the existing portfolio of SNPs, while also testing additional plans. For example, CMS has a dementia SNP whose design has limited its enrollment and popularity, while the demographic headwinds demand more focus on this population. In addition, there could be benefit from a health plan that focuses on addressing the growing needs of older and disabled adults who experience homelessness. Older adults would benefit richly from the creation of new MA health plan models that are specifically targeted on populations underserved by FFS Medicare and the existing set of MA offerings.

A fourth set of models could focus on new sales and distribution models that leverage MA brokers to encourage more health management and healthcare prevention. Increasing scrutiny has been applied to deceptive marketing practices by MA brokers, most recently with a Senate Finance committee probe led by Chairman Ron Wyden (OR) and the call from US Representatives Mark Pocan (WI-02) and Ro Khanna (CA-17) to prohibit insurers from using “Medicare” in advertisements. Brokers in MA receive an upfront commission, as well as a lifetime annual “tail payment” for every beneficiary they enroll in a plan. The best brokers earn this tail payment by providing continuing care coordination and navigation for beneficiaries. There may be opportunities to modify the nature of the payments to brokers to enhance their roles as community health workers, care navigators, and health advocates on behalf of the beneficiaries they serve while improving the quality of care and service in the process.

Unfortunately, the federal debate on MA has devolved into an overly simplistic academic discourse on whether outcomes and cost are better or worse in MA versus FFS Medicare. While this debate continues to unfold and is important, the people have spoken. As of 1/1/23, more than half of Medicare beneficiaries will elect to receive their Medicare coverage through privately administered MA plans rather than through FFS Medicare. The need for innovation in the program has never been more urgent or more relevant.

CMS and the Innovation Center must continue its work on behalf of all beneficiaries and rapidly accelerate the work of improving its administration of the MA program.

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