Financial Fitness for Medicare Advantage

“If we could give every individual the right amount of nourishment and exercise, not too little and not too much, we would have found the safest way to health.”  – Hippocrates

Health insurers face a strong incentive to attract and retain customers that on-average are in better health than the customers of their competitors. This allows insurers to retain a larger percentage of premiums in order to generate profits for shareholders. This nefarious process of picking healthier customers is termed “cherry-picking” and is legal in the individual and small group markets (until reforms from the Affordable Care Act fully take effect in 2014).

The authors of this study looked at 22 Medicare Advantage plans – 11 that chose to offer coverage for fitness clubs and 11 that did not offer such coverage  – to explore the often assumed logical theory that healthier members will enroll in health plans offering benefits catering to a healthier crowd. This study utilized a quasi-experimental case-control design comparing difference-in-differences between these two types of Medicare Advantage plans. Data were derived from the Medicare Health Outcomes Study maintained by the Centers for Medicare and Medicaid Services.

Plans in the case (experimental) group implemented fitness memberships in the years (2004 or 2005) prior to measurement (2006 and 2008) of the four self-reported outcome variables: general health, limitation of moderate activity, difficulty walking, and Physical Component Summary (PCS) score. Plans in the control group did not implement a fitness program. In each type of Medicare Advantage plan, there were early enrollees (before introduction of fitness benefits) and new (late) enrollees.

Enrollees in the case group were similar in most instances to those in the control group with one notable exception. Late enrollees in the case  group were significantly more likely than early enrollees to have attended college (40 percent vs. 35 percent, p=0.03).

Results from the study indicate that late  enrollees in the case plans reported better health than early enrollees. Among control plans, there were no significant differences in reported health outcomes between early and late enrollees.

The difference-in-differences design allowed researchers to tease out the impact of adding a fitness membership benefit on health outcomes. Late enrollees into Medicare Advantage plans with fitness memberships were 5 percentage points more likely to report “excellent” or “very good” health status (baseline approximately 29 percent), 9 percentage points less likely to report limitation in moderate activity (baseline approximately 56 percent), and 7 percentage points less likely to have trouble walking (baseline approximately 32 percent). PCS scores of late enrollees were also 2 percentage points higher (baseline 39 out of 100). The improved measures for moderate activity, walking, and PCS scores persisted after a 2 year follow up period.

Commentary

It has long been assumed that to cherry-pick healthier enrollees insurance companies might offer benefits geared towards healthier cohorts. Do glossy brochures with seniors skiing or hiking help to recruit healthier Medicare beneficiaries? Offering fitness memberships, as reviewed in this study, achieves the same outcome.

It seems logical that late enrollees – to whom all the health benefits accrued – sought out these specific Medicare Advantage programs because of the added luxuries provided. However, because the study design was a retrospective case-control and not a true experiment, the authors can only imply an association between healthier patients and fitness memberships. Absolute proof remains elusive.

Nevertheless, this study should serve as a warning to Medicare and Medicaid administrators. Even though insurers participating in Medicare Advantage cannot explicitly cherry-pick their patients, marketing techniques and other extraneous offerings offer cunning insurers ways to skew their patient profile, minimize risks, and thereby deliver higher profits to investors. When the insurance regulations of guaranteed issue hit the marketplace as a result of the Affordable Care Act in 2014, health insurers should be expected to apply these same tricks to accomplish what underwriting and exclusionary policies have done in the past: maximizing profits at the expense of patients.

Cooper AL and Trivedi AN. Fitness memberships and favorable selection in Medicare Advantage plans. N Engl J Med. 2012 Jan 12; 366 (2): 150-7.

by

Cedric Dark, MD, MPH