Make Medicare Advantage more flexible to allow value-based care, Fendrick tells Congressional panel

More than 19 million Americans receive their health insurance through Medicare Advantage plans offered by private insurance companies – a program aimed at increasing choice and flexibility. 

But those plans don’t have enough flexibility to customize a key factor for the people they serve: how much they have to pay out of their own pockets when they see a doctor, fill a prescription or have a procedure.

And that gets in the way of truly getting the most value out of the federal Medicare dollars that pay for their care. 

That was the message that Mark Fendrick, M.D., brought to Congress on June 7, as he testified before the Health subcommittee of the U.S. House Ways and Means Committee.

“The typical Medicare beneficiary does not worry about the total amount that the U.S. spends on health care, but they do care deeply about what it costs them,” said Fendrick in his prepared written testimony. And for 1 in 4 of all Medicare beneficiaries, health costs took up one-fifth of their entire income in 2016.

Fendrick, who co-directs the U-M Center for Value-Based Insurance Design, described to the House members the need for new policies that would allow Medicare Advantage plans to charge less for the services that individual patients need the most, based on the chronic conditions and risk factors they have.

Fendrick called for Congress to change the “one size fits all” system for co-pays and other cost sharing, to allow for what he called “clinical nuance.”  Just as Congress has worked to incentivize plans and providers to provide evidence-based care, so to should patients be incentivized through lower cost to seek the services that will benefit them most based on their individual diagnoses.

“The lack of robust consumer incentives to improve their own health, coupled with illness burden, intense medication needs, and high out-of-pocket costs, often lead to undesired clinical and financial outcomes,” he said.

In January, Medicare Advantage plans in seven states got permission to test a value-based insurance design for people with seven chronic conditions. Several plans have already begun doing so – and from early responses from seniors who have taken part in a Pennsylvania plan, it’s had a positive effect even in the first few months.

“This program is allowing me to access care again,” one patient with chronic obstructive pulmonary disease told his plan. Another with the same condition said “I feel good knowing I can afford a visit when I get sick.”

Fendrick told the Congressional subcommittee about two bills with bipartisan support – H.R. 1995 and S.870 – that have been introduced in both houses to allow for Medicare Advantage plans in all 50 states to try value-based design for cost sharing.

He also noted that in January 2018, the TRICARE health plan serving military servicemembers and their dependents will be able to offer value-based designs thanks to a pilot project approved last year. And commercial plans offering employer-sponsored insurance have also begun testing value-based designs.

To read the testimony and see the subcommittee hearing video, visit the VBID website.

Fendrick is a professor in the Medical School's Department of Internal Medicine and the School of Public Health's Department of Health Management and Policy.