More Medicare Advantage enrollees may decrease fee-for-service spending

In counties with the largest growth in Medicare Advantage (MA) enrollment, there was “a significant decrease” in spending growth for fee-for-service (FFS) Medicare, according to a new study published in the journal Health Affairs.

Led by Harvard T.H. Chan School of Public Health research assistant Garret Johnson, the study used CMS data on the penetration of MA into each county in the U.S., along with average spending per beneficiary in FFS Medicare. To test whether increased MA enrollment correlated to reduced FFS spending in the same county, Johnson and coauthors used a lagged model, comparing 2007-2009 MA penetration to FFS spending in 2009-2011.

Nearly three quarters (73 percent) of the more than 3,000 counties studied had MA penetration increase by at least 5 percentage points, with most growth coming in larger and poorer counties in the Northeast and South. The quartile of counties with the greatest change in MA penetration—an average increase of 20.5 percentage points—saw FFS Medicare spending go down as penetration increased.

“An increase of 10 percentage points in Medicare Advantage penetration was associated with a decrease of $154 in annual per capita FFS Medicare costs,” Johnson and coauthors wrote. “We also found a significant negative association between Medicare Advantage penetration and FFS Medicare spending growth only in the highest quartile of supply for both physicians overall (a decrease of $96.68) and primary care physicians (a significant decrease of $130.19).”

In counties with lower MA penetration, there wasn’t a significant relationship to FFS Medicare costs.

Johnson and his coauthors said their results showed that not only is MA growth helping poorer communities, it’s plausible providers changed how they delivered care once more patients in their area were enrolled in managed care.

“It is possible that many of the managed care techniques commonly used by Medicare Advantage plans for their patients (such as care guidelines and restrictions on referrals to specialists with high use of health services) might influence physicians’ care of patients in other plans,” Johnson and his coauthors wrote. “The fact that we found a more pronounced effect of Medicare Advantage penetration in areas with a greater supply of primary care physicians suggests that these providers may be important mediators of managed care spillover effects.”