Spillover effects from MSSP

The Medicare Shared Savings Program (MSSP) is the delivery reform side of the ACA. It applies to Medicare Fee for Service (FFS) where provider entities of various flavors take on significant financial risk and financial upside to manage a defined Medicare FFS beneficiary population for a year for a given cost in an Accountable Care Organization (ACO). If the ACO spends less money than the target, the ACO keeps some of the gain. If they spend more money, in some models, the ACO loses money. In some ways, it can be cheekily described as Medicare Advantage incentives in FFS clothing.

So far, it looks like the most recent round of models is leading to small savings with increased quality. This is a win. There is a big methodological fight over what the appropriate counterfactual should be to assess savings. I am, at best, qualified to tell everyone in that seminar room that we need to get out now as someone has it reserved for a meeting starting in two minutes.

The CMS actuaries make a very good point in a recent rule (h/t Farzad Mostashari) that the savings which are currently being attributed to the MSSP program are ignoring a very real and growing source of secondary savings. Medicare FFS spending levels drive Medicare Advantage benchmark bids.

To the extent that proposed changes to the Shared Savings Program will result in net savings… In addition, because MA payment rates depend on the level of spending within traditional FFS Medicare, savings or costs arising from the proposed changes to the Shared Savings Program would result in corresponding adjustments to MA payment rates…. these secondary impacts has been included in
the analysis shown.

Let’s back that out a little bit. Medicare Advantage is bid out at the local cost of providing the traditional Medicare FFS benefit package. If the cost to provide FFS benefits are lower, than the Medicare Advantage bid is lower. That saves the federal government money to provide the same service at a slightly lower price.

Now this is where it gets interesting. We could plausibly see a virtuous interaction between Medicare Advantage and MSSP.

Medicare Advantage has been shown to have positive spillover effects on the cost of FFS Medicare. As more people are covered by Medicare Advantage, the average cost of FFS goes down. Austin Frakt has a good summary of the recent literature (up to mid-2016) on Medicare Advantage spillover effects. The theory is that Medicare Advantage payers more aggressively manage care than FFS Medicare. Once a certain threshold of revenue is met, providers (doctors and hospitals) are willing to change their care patterns for all patients and not just their Medicare Advantage patients. This leads to lower FFS costs which then restrains MA bid growth in the future.

Now, what I am thinking is that if MSSP also lowers FFS costs, MA bids need to be lower. It places a cycle where more and more of the entire Medicare population is being actively managed by some risk bearing entity that has at least partial gains from becoming more efficient.

It may not be a world changer, but this could be another one of those 1% solutions that pushes us in the right direction.

4 replies
  1. 1
    WilliamC says:

    Thanks David! Didn’t want you to think no one was reading your posts. I just have nothing to comment or add except to let you know that you are appreciated and read every morning, even though I frequently have to reread it all multiple times because my insurance-legalese is a bit rusty…

    Keep up the good (wonky) work!

  2. 2

    @WilliamC: No worries, this is a piece that is aimed at a very different audience that the general Balloon Juice commenters and I am getting the feedback and reaction that I want from that very narrow and geeky audience.

  3. 3
    StringOnAStick says:

    Our system is such a hodge podge. My parents were on federal employee retirement benefits, including medical. My mom died in June and because of how she elected to retire, my dad was no longer eligible for the medical insurance so he went on Medicare and got a Medicare Advantage policy as well.

    Last weekend he had a scary blood sugar/weakness episode, possibly a side effect from a cortisone back injection he’d had a few days before; he’s had that side effect before. So, two days later he sees the endocrinologist that has been seeing him for years for his Type 2 diabetes and the doc tells him he doesn’t need to see him anymore and that his GP can handle his diabetes care from now on. Hmm, my dad just changed to a lower reimbursement insurance and just had a scary medical event related to his diabetes, but his diabetes specialist has punted him back to his GP. Interesting coincidence, that.

  4. 4
    WilliamC says:

    @WilliamC: Heh, I’m one of those people. Operations at a not for profit for over half a decade, was in Admin most of my 20 year professional career, at one point managed 6 different lines of insurance, and got to be something of a whiz at it, but who has time for all that now with the world crumbling around us and so much life to live? You do! Thanks for what you do!

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