How States Can Improve the Value Provided by Medicare Advantage Plans

State Medicaid agencies can increase financial transparency and improve the value of Medicare Advantage Dual-Eligible Special Needs Plans (D-SNPs) for states, the federal government, and taxpayers by rewarding plans that prioritize patient care over administrative costs and profits, according to Mathematica experts in a new Health Affairs Forefront article.

“As the federal government considers ways to reduce the deficit by cutting spending in both Medicare and Medicaid, it is critical that the government gets the best value from [Medicare Advantage] plans,” write the authors, Mathematica’s Ryan Stringer, Debra Lipson, Erin Weir Lakhmani, and Jessica Nysenbaum. “This is especially important for the nearly 13 million dually eligible individuals who qualify for both Medicare and Medicaid.”

State Medicaid agencies can extract more value from Medicare Advantage D-SNPs that specialize in providing care to people who are dually eligible for Medicare and Medicaid. The authors recommend ways that states can improve D-SNP financial transparency and reward plans with higher performance on the medical loss ratio (MLR). MLR is the percentage of revenue that plans spend on patient care rather than administrative expenses or profit, and it is the most commonly used metric to assess the value that health plans provide.

As the government evaluates Medicare and Medicaid spending, the stakes are especially high for people enrolled in D-SNPs, who represent a disproportionate share of Medicare and Medicaid spending because of higher rates of chronic disease and disability.

Specifically, the coauthors provided the following recommendations to states to extract more value from D-SNPs:

• States should require D-SNPs to report Medicare Advantage MLR performance data to the state.
• States can require certain types of D-SNPs to operate within D-SNP-only contracts, which distinguish D-SNP MLR performance from that of other Medicare Advantage plans operating in the same or other states.
• States can use Medicare Advantage MLR performance data to reward D-SNPs with strong MLR performance. For example, for D-SNPs with MLRs that exceed the 85 percent minimum, states can do the following:
  • Reward D-SNPs with default enrollment or marketing-related incentives, which D-SNPs can use to increase their enrollment.
  • Reward D-SNPs’ affiliated Medicaid managed care plans with auto assignment, which can increase enrollment in these affiliated plans.
  • Assign more points to D-SNPs that have met MLR targets if the state is using a scoring system to determine which D-SNPs they will contract with.

“State Medicaid agencies can extract more value from D-SNPs by paying close attention to their MLRs and rewarding D-SNPs that provide the best value,” conclude the authors. “Along with steps to improve the quality of care rendered by these plans, state oversight of D-SNP MLRs can help to deliver on the promise of integrated care and improve outcomes for dually eligible individuals.”

More tips and resources about D-SNP contracts and how to improve the performance and coordination of Medicare and Medicaid integrated plans are available from the Centers for Medicare & Medicaid Services' Integrated Care Resource Center. Mathematica and its partners coordinate the center and provide technical assistance, including data analyses and policy research, one-on-one calls with states, group learning calls, webinars, and written tools.