The Importance of Medicare Advantage Plan Design: Financial Generosity, Coverage Design, and its Impact on Health Equity

Growing enrollment in Medicare Advantage (MA) over the past few decades has resulted in an expansion in the types of MA plans available to beneficiaries. The variety of Medicare plan designs has come partially through government policies like the Medicare Modernization Act.

Inovalon partnered with Harvard Medical School to understand the implications of various Medicare plan designs on who enrolls and on post-enrollment healthcare utilization and quality outcomes.

This final piece in our four-part research series examines whether more financially generous, zero-premium MA plans attract a more socioeconomically disadvantaged population. We look at plan coverage design to determine whether Health Maintenance Organizations (HMOs) achieve greater utilization reductions than Preferred Provider Organizations (PPOs) after controlling for differences in who enrolls.

The study provided:

• Evidence that individual MA plans differ markedly in terms of financial generosity and coverage design
• Insights on how plan design impacts who enrolls and health outcomes post-enrollment
• Findings to help plans understand expected performance and offerings that would deliver optimal quality and costs

The results will facilitate strategic planning for the resources needed to care for new enrollees such as types of specialty providers, availability of hospitals, post-acute care, and the population social risk factors that must be addressed to achieve health equity.

Understanding a wide variety of Medicare plan designs

MA plans vary substantially from one another regarding their coverage design and patient out-of-pocket costs like premiums, co-insurance, co-pays, and deductibles. The wide variety of plans available has made it challenging for health plans and policymakers to understand how different plan design features impact who enrolls and post-enrollment utilization and health outcomes.

Researchers at Harvard Medical School and Inovalon used real-world data to evaluate how different plan design features impact who enrolls and how certain features impact healthcare utilization and quality of care outcomes, especially among socioeconomically disadvantaged Medicare beneficiaries.

Do HMOs or PPOs have more efficient outcomes?

The differences that exist between MA plans on paper, in terms of plan design, are highly consequential in practice. Looking separately at plans’ coverage design, design between HMO vs. PPO status, we found that those in MA HMO plans are much more likely to have been in a commercial HMO pre-65 and those in MA PPOs are much more likely to have been in a commercial PPO pre-65. Beneficiaries appear to gravitate towards MA plans with similar coverage design to what they were exposed to pre-Medicare. Beneficiaries have tended to view MA as a monolith with only HMO coverage, but as MA grows and people become aware of the different plan types, more are gravitating toward PPOs.

We also found that MA HMO plans produce substantially larger utilization reductions than MA PPO plans, even after adjusting for differences in who enrolls in the different plans and for differences in their baseline characteristics and healthcare utilization before Medicare enrollment.

Future considerations for Medicare Advantage

Key findings from our study highlight the broad appeal of MA plans and the impact of plan design.

Reasons for MA appeal:

• Diverse options: The variety of MA plan types is a significant factor in attracting over 50% of all Medicare beneficiaries in 2023
• Financial generosity: MA’s appeal to socioeconomically disadvantaged populations partly stems from its relative financial generosity

Impact of plan design on MA outcomes:

• Consequential design features: Specific plan design features significantly influence individual plan health outcomes
• Overall program impact: The composition of plans under MA affects overall program quality outcomes and cost, highlighting the importance of plan design for insurers and policymakers

Real-world considerations

This research can help MA plans identify the set of offerings that would deliver the best overall quality and cost outcomes. Additionally, health plans can better understand the expected performance of various health plan types and features.

Our analytics provide MA plans with predictive insights into utilization and quality of care across various plan designs. This enables plans to pinpoint the optimal offerings for superior quality and cost-effectiveness, ensuring efficient allocation of resources for new enrollees.

Key considerations include:

• Specialty provider types
• Hospital availability
• Post-acute care options
• Additional required services like non-medical benefits (e.g., transportation, food delivery, social support)
• Addressing social risk factors in the target population

For policymakers, our findings underscore the diversity in beneficiary needs and preferences that different MA plans cater to. The study reveals the significant value MA programs offer — particularly their appeal to socioeconomically disadvantaged groups through a wide array of plan designs.

Moreover, our research confirms that encouraging a strategic mix of MA plan options can enhance Medicare’s benefits, potentially reducing overall program costs and supporting its financial sustainability.

Access the full study findings

Understand the methodology used, dive into the analysis, and learn more about key findings from this study.

Read the white paper to learn more.

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