Medicare advantage plans have 12% lower overall health costs than traditional Medicare, largely due to lower utilization of acute care services, such as inpatient stays, new research shows.
The Harvard Medical School and Inovalon analysis found that, compared with fee-for-service Medicare, MA has:
- 51% fewer hospital inpatient stays and 22% fewer emergency department visits
- 12% lower prescription drug costs
- 7% fewer primary care provider visits
- 3% lower use of outpatient services
- 2% reduction in post-acute care utilization, including skilled nursing facilities.
The reduction was largely seen in acute care services with no meaningful change in PCP office visits, which indicates MA decreases wasteful care while maintaining access to high-value primary care, the authors say. “The utilization reductions under MA arise largely through MA’s ability to reduce hospitalizations.”
Researchers followed MA and FFS groups with comparable demographic, socioeconomic and health characteristics, beginning two years before they enrolled in Medicare and during the first two years after enrollment. They found a substantial gap in utilization between MA and FFS after both cohorts entered Medicare. The traditional Medicare cohort saw a 20% increase in utilization soon after the transition, and this grew to a 35% increase in the two years after enrollment.1 Utilization in the MA cohort remained flat during the pre- and post-Medicare enrollment period.
The delayed increase in the utilization gap suggests it is a result of preventive care and care management, which the researchers note are “much more prevalent in MA” and tend to bring greater impacts over time. Because of this, the benefits of MA “may be even greater than what we estimate here, if we look over a longer timeframe.”
MA enrollment has increased from 17% of Medicare beneficiaries in 2000 to more than 50% in 2023. As the program continues to gain popularity, MA plans will have a growing opportunity to improve member care and outcomes by promoting preventive care and care management. Meanwhile, new policies should consider the program’s potential to help reduce costs and improve efficiency within Medicare and in the overall US health care landscape.
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- Teigland, C, Zulkarnain, P, Su, Y, et al. Harvard-Inovalon Medicare Study: Utilization and efficiency under Medicare Advantage vs. Medicare Fee-for-Service. September 2023. https://www.inovalon.com/wp-content/uploads/2023/09/PAY-23-1601-Insights-Harvard-Campaign-Whitepaper_V6.pdf