Will the Trump Administration push more beneficiaries into Medicare Advantage managed care plans? Will the Administration limit payments to the insurance companies that run those plans? Will it do both? Whatever Trump does, the consequences will be significant for older adults and younger people with disabilities who rely on Medicare for their health care.
Done well, an overhaul of MA could help plans improve quality of care, operate more cost-effectively, and do a better job coordinating medical and personal care for their members. Done poorly, Trump could force older adults and younger people with disabilities into plans that increasingly cut corners to protect narrowing profits. That would leave members and providers even more frustrated than they are today.
Hope And Reality
Medicare managed care is supposed to give insurance companies financial incentives to provide well-organized, coordinated care to older adults. Plans would be rewarded for keeping their members healthy.
Patients would enjoy better health outcomes and Medicare would save money by having an insurer manage medications, primary and specialty care, rehab, and even a modest amount of personal care for each member.
That would be in stark contrast to traditional Medicare where often-uncoordinated care is provided by multiple doctors who are rewarded for the number of tests, procedures, and therapies they provide, rather than improvement in their patient’s health or quality of life.
But the reality has been disappointing. Evidence of better care delivery and outcomes in MA has been mixed at best—better for some conditions and worse for others. And cost savings has been illusory. Medicare, which pays plans a flat, per-member, per month fee, spends more on MA than it does for traditional fee-for-service for similar patients.
One reason: Plans get higher payments for members with complex medical needs, a process known as risk adjustment. And insurance companies have become aggressive at diagnosing conditions, some phantom, that increase those payments.
Still, 54 percent of Medicare enrollees were in MA plans by last year, and by 2035, that share could increase to nearly two-thirds, even without changes to the system.
Mixed Signals
Trump has been sending mixed signals about Medicare. He often vows no changes at all but sometimes says he would cut “waste, fraud, and abuse” without ever defining what that means.
His designated government-cutter, Elon Musk, talks about the need to slash federal entitlement programs, including Medicare. And Musk’s promise to cut as much as $2 trillion from federal spending effectively cannot be met without substantial reductions in Medicare, which accounts for about 15 percent of all federal government spending.
Trump’s nominee to head the Centers for Medicare and Medicaid Services, TV celebrity and physician Mehmet Oz, has long promoted the idea of Medicare Advantage for All. Project 2025, the conservative manifesto that seems to be informing much of the Administration’s policy agenda, proposed automatically enrolling all beneficiaries in MA unless they affirmatively chose traditional Medicare.
At his confirmation hearing last week, Oz seemed to acknowledge some of MA’s problems. He vowed to streamline the plans’ processes for requiring prior authorizations before paying for care, a source of enormous frustration for providers and patients, even though 94 percent of these reviews eventually are approved.
He also suggested the Administration would crack down on overpayments to plans.
In February, The Wall Street Journal reported the Trump Justice Department opened an investigation into MA billing practices by United Healthcare, the largest Medicare Advantage insurer. United said it was unaware of the probe.
Tough Choices
And here is where it gets interesting. The Medicare Payment Advisory Commission (Medpac) which advises Congress on the health program, estimates that Medicare pays MA plans 20 percent more per patient than it pays for traditional Medicare, at a cost of $84 billion annually.
That seems like tempting cost savings for Musk and Trump. But while some of those payments end up in the pockets of insurance company executives and shareholders, some subsidizes the very extras, such as dental and vision coverage, gym memberships, debit cards, and low- or no-cost drug benefits, that attract consumers to the plans in the first place.
If their federal payments are cut, MA plans may trim those benefits. They also may further lower their payments to hospitals and skilled nursing facilities and shorten stays, which could limit access to those facilities by MA members. Already, plans pay nursing facilities about 20 percent less than traditional Medicare.
By controlling payments to MA plans, the Trump Administration could end up discouraging enrollment in the privatized Medicare system it seems to support.
Still, one influential conservative think tank, the Paragon Health Institute, has recommended several changes to the MA system that, it says, could lower costs by $250 billion over 10 years and still boost enrollment. They include changes to Medicare’s model for risk adjustments and capping payments to MA plans in certain communities at the local fee-for-service costs.
Despite Trump’s vow to never touch Medicare, it seems highly likely that the Administration, and congressional Republicans, will make changes to the program. Whether for good or ill remains to be seen.
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