Medicare Advantage Has Little Impact on Traditional Medicare Spending

Medicare Advantage market share has little effect on how physicians care for or code their fee-for-service patients, according to new research from the Medicare Payment Advisory Commission on Thursday.

Many health experts believe Medicare Advantage's growing rolls have "spillover" effects on traditional, fee-for-service Medicare because most physicians care for both types of patients. As Medicare Advantage grows in popularity, they hoped that would induce physicians to practice lower-cost medicine and code more.

But MedPAC's study found that fee-for-service spending was just 2% lower in markets with high Advantage penetration compared to those with the lowest numbers. High Advantage penetration averaged 52.2% compared to 13% in low markets.

MedPAC also found that a high Advantage market share was associated with slightly more hierarchical condition category coding growth and lower spending growth. MedPAC said that markets with low fee-for-service use can expect little savings from spillover and that markets with high fee-for-service use can expect more spillover savings in traditional Medicare.

The findings shouldn't be surprising because the direct impact of ACOs on Medicare fee-for-service spending is small, said Jeff Stensland, a MedPAC principal policy analyst. It would be surprising if the indirect impact of Medicare Advantage had greater effects on fee-for-service spending than the direct impact of ACOs.

The policy implications of so-called "spillover" effects aren't clear yet because more research is needed. MedPAC's study concluded that the size of the spillover effects are too small to change its prior conclusion that Advantage plans result in higher Medicare spending in some markets and lower Medicare spending in other markets.

"This analysis should not be construed as an indictment of MA plan effects. What it's really saying is that provider level effects are not driving the spillovers," said Dr. Amol Navathe, a MedPAC member.