Medicare Advantage: Moving Toward A Better Model For American Health Care

Millions of elderly people gained access to affordable health care with the legislative passing of original Medicare. (Photo credit: Wikipedia)

Despite the political angst, the doomsday predictions and a very rocky launch, the Affordable Care Act has enabled more than 8 million Americans to acquire insurance coverage through the public exchanges.

Health insurance increases the probability that patients will access the medical care they need. And my colleagues at Kaiser Permanente are already seeing some positive stories emerging as a result.

They've shared dozens of stories with me about patients with undiagnosed medical problems who are now receiving treatment. In particular, I enjoyed hearing about two new patients in Northern California who've benefited from being insured. They came in with life-threatening cancer: One, a mother with a uterine malignancy, and the other, a young man with a testicular mass. Both had gone years without medical care because they were unable to afford it. And now - thanks to medical coverage, early diagnosis and successful treatment - both will live.

But expanding access to health insurance is only the first step. Improving health care delivery is the next step in this journey.

With all the acrimony in our nation's capital, bipartisan agreements are few and far between.

Medicare Advantage may be the one platform on which both parties can stand. Examining this program and why it has proven so successful offers us insights into where we as a nation might choose to go.

Medicare Advantage: A History Born from Necessity

Since the Medicare program was created in 1963, the federal government has been insuring citizens over the age of 65.

This original form of Medicare, called traditional Medicare, was and remains a 'fee-for-service' program. That means the Centers for Medicare and Medicaid Services (CMS) - the agency that administers the Medicare program - pays individual physicians for the services they provide to Medicare beneficiaries. Think of a service as an office visit, a test or a procedure. The price for those services is determined by the agency's Physician Fee Schedule.

Beginning in 1978, Medicare beneficiaries had a second option. They could enroll in private Health Maintenance Organizations (HMOs) under a 'risk contract' between CMS and the HMOs.

Over the next 25 years, many modifications to the original legislation were enacted by Congress. And in 2003, this program was renamed Medicare Advantage.

Unlike the government-run traditional Medicare option, the current Medicare Advantage program requires CMS to contract with private health plans on a prospective payment basis. These health plans then contract with individual medical groups and preferred provider networks to deliver the care that enrolled Medicare beneficiaries need.

Operating with a global budget and leveraging their capability to measure and report both quality performance and beneficiary satisfaction, Medicare Advantage plans have demonstrated increased care coordination and superior clinical outcomes.

As a result, these plans are becoming increasingly attractive to Medicare beneficiaries. In fact, 50 percent of new Medicare enrollees choose a Medicare Advantage option - enrollment in the program has tripled in a decade, and now exceeds 16 million beneficiaries. Some experts predict that Medicare Advantage enrollees will represent 30 percent of all Medicare beneficiaries by 2016.

Let's explore three reasons why this program is so successful.