One of the success stories of this year’s annual Medicare enrollment season is the measurable increase in the overall quality ratings for Medicare Advantage plans as determined by a rating methodology established by the Centers for Medicare & Medicaid Services. This trend was covered in an earlier HealthPocket InfoStat.1 Entering into the open enrollment season, the government announced that over 50 percent of Medicare Advantage enrollees are now in plans with four and more stars.2
To provide useful guidance to Medicare Advantage consumers about the potential relationship between quality and cost, HealthPocket looked at financial attributes of the plans rated four stars and above as compared with the universe of Medicare Advantage plans. The HealthPocket review considered all plans offered in each county of the country, so plans offered in a broad section of the United States were counted frequently. The study was based on available plans and not the market share of the plans.
HealthPocket’s data analysis found that for 2014, plans rated 4 stars and above are available to residents of over half of the counties in the United States. The research also indicates that on average the highly rated plans come with more expensive average monthly premiums than the average of all plans. As shown in the chart below the average monthly premium for plans ranked 4 stars and above is $85 while the average for all plans is $58.
One of the major insurance components of Medicare Advantage plans that is lacking in traditional Medicare is an annual limit on out-of-pocket expenses paid by enrollees. At the high end, a plan must cap out-of-pocket expenses at $6,700. At the lower end, many plans cap their expenses at $3,400 or below. In reviewing 2014 plan data, the incidence of low maximum out-of-pocket expense caps is about 30 percent for all plans as well as for the highly rated ones. That finding indicates that strong ratings do not preclude the availability of plans with relatively low out-of-pocket cost exposure.
A great deal of scholarly research has focused on the question of whether higher cost in health care leads to higher quality. Some of the recent research shows that there is no clear correlation between expense and quality.3 For those who advise seniors on the selection of a Medicare Advantage plan and for consumers themselves, the question remains whether it is worth paying higher premiums to obtain a higher rated Medicare Advantage plan.
This latest HealthPocket’s study indicates that many high quality choices exist that cap an enrollee’s financial risk at $3,400 or lower per year. With this relatively low out-of-pocket maximum someone can limit their worst-case health expense scenario for the year,4 even if the highly rated plan has higher monthly premium costs than other available choices.
The Medicare star ratings measure customer service as well as outcomes related to staying healthy or managing chronic ailments.5 If a health plan is able to keep someone healthy longer, reduce the number of tests and doctor visits required and stabilize chronic conditions, the difference in premium costs will be quickly outweighed by the reduction in out-of-pocket costs as well as the financial and non-financial benefits resulting from improved health.
Medicare plan choice should be based on each person’s circumstances. The Medicare annual enrollment period, running from October 15 through December 7 is the time for enrollees to evaluate their preferences and compare how the options available to them meet their objectives. HealthPocket helps consumers in this process by providing a free Medicare comparison tool so they can price and compare options and review quality scores. For consumers contemplating whether to pay slightly higher premiums for a higher rated plan, the tab labeled “CMS Ratings” within the “Plan Details” section has a wealth of information about how a plan scored in specific areas that are likely to be important to each consumer.
Data for 2014 Medicare Advantage market status nationwide by county and by star rating was taken from the October Medicare Public Use File, as was premium data by each plan in each county. Data regarding out-of-pocket maximum was taken from CMS’ Medicare landscape file dated October 21, 2013. Medicare Advantage plans include those that provide a drug benefit as well as those that do not provide a drug benefit. Special needs plans are not included in this research.
All analysis assumes the accuracy of the underlying government data. While every effort was made towards a comprehensive collection of plans, HealthPocket makes no representation that every plan within the market or in an individual state was included in this study. Percentages are rounded according to standard industry practices.
Steve Zaleznick, Executive Director for Consumer Strategy and Development at HealthPocket.com, authored this survey analysis. Correspondence regarding this study can be directed to Mr. Zaleznick at firstname.lastname@example.org.
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1 See: http://www.healthpocket.com/healthcare-research/infostat/2014-medicare-advantage-star-ratings-improve#.UovLdpFqeRI.
2 See: http://www.hhs.gov/news/press/2013pres/09/20130919b.html. The highest number of stars that can be awarded is five.
3 See: http://newsatjama.jama.com/2012/03/13/author-insights-parsing-the-link-between-health-care-costs-and-quality/.
4 The enrollee could also be responsible for additional prescription drug plans based on the terms of a Medicare Advantage with Prescription Drug plan.
5 See: http://www.medicare.gov/Pubs/pdf/11226.pdf.
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