Medicare Advantage (MA) plans will be able to offer a new type of benefit starting next year, which could be a game-changer for senior living. It could create a new revenue stream for providers while also making them more important players in the U.S. health care system overall.
Yet, there are still important questions to be answered about the new benefit and some doubts about how large a near-term impact it will make.
On Monday, the policy shift was finalized in a call letter issued by the Centers for Medicare & Medicaid Services (CMS). In the past, Medicare Advantage plans were not allowed to cover “daily maintenance” types of care, but that standard has now been relaxed. Starting in 2019, the private-sector insurance companies that administer Medicare Advantage—including heavyweights such as UnitedHealthcare and Humana—will be allowed to cover certain types of non-skilled in-home care.
If independent living or assisted living qualifies as a beneficiary’s “home,” it would mean that senior living companies could receive MA reimbursement for certain types of care provided to residents who are enrolled in plans that offer this benefit.
Although the call letter is not explicit on this point, it’s safe to assume that MA providers will consider a senior living setting to be a person’s home, according to Fred Bentley, vice president with Avalere Health, a health care research and consulting firm based in Washington, D.C.
CMS would want a broad definition of home in order to achieve the aims of this new benefit—namely, to keep people healthier for longer periods of time in lower-cost settings, reducing expensive emergency department visits and hospitalizations, Bentley told Senior Housing News.
“I think it’s a boon to senior living,” he said of the policy change.
Sizing up the opportunity
The change should be a win-win for senior living and Medicare Advantage companies, according to Lynne Katzmann, CEO of Juniper Communities. Bloomfield, New Jersey-based Juniper operates 21 communities in three states, offering services across the continuum from personal care to skilled nursing.
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The majority of spending in the U.S. health care system goes toward a small subset of patients with multiple chronic conditions and functional limitations, and this describes many senior living residents, she told SHN. By now creating a benefit that limits exacerbations among this group by bolstering their care, Medicare Advantage plans should be able to better control their costs while improving consumer outcomes and satisfaction.
Meanwhile, senior living providers could potentially cast a wider net for residents. Private-pay senior living is typically expensive, involving both rent and costs related to services. If Medicare Advantage covers the cost of services, more people might find assisted living a viable option. Length-of-stay could also improve, as residents spend down their own assets more slowly, while staying healthier longer.
“We’re not getting rid of our private housing and hospitality model, that remains private,” Katzmann said. “But as our people age and have higher acuity, this provides addtional sources of revenue so they can age in place.”
Senior living providers who are reluctant to directly contract with Medicare Advantage could still see upside from the change, if they work with home care companies or other ancillary service providers that are contracted with MA, she noted.
Juniper is already making its case to MA companies, armed with impressive results from its Connect4Life integrated care model. To contract with Medicare Advantage plans, senior living providers likely will need to prove through data they can deliver the cost and quality results that these payors are seeking. But more than in the past, senior living players might find Medicare Advantage companies are receptive—showing just how much MA is appreciating what senior living brings to the table, even before this new benefit was finalized, MA providers were reportedly interested in acquiring senior living operators.
Katzmann is also in the process of putting together a consortium of senior living and care providers to start their own MA plan. By working together, these providers should be able to enroll a large enough portion of their resident population to be profitable and start to prove out the senior living value proposition, she believes.
Already, two of the largest senior living operators in the nation—McLean, Virginia-based Sunrise Senior Living and Catonsville, Maryland-based Erickson Living—have started their own Medicare Advantage plans.
Providers have been launching these in-house plans due to a few trends. Medicare Advantage has long offered more flexibility than traditional Medicare in covering services that are valuable to seniors, and consumers have been embracing these plans in ever-larger numbers. More than 19 million people, or 33% of all Medicare beneficiaries, were enrolled in MA as of 2017, according to Kaiser Family Foundation data.
Notes of caution
Like Katzmann and Bentley, Anne Tumlinson is excited by this Medicare Advantage change—but with some reservations. Tumlinson is the founder of consultancy Anne Tumlinson Innovations and previously led Medicaid oversight at the Office of Budget and Management, and she founded the post-acute and long-term care consulting practice at Avalere.
“We still need CMS to interpret [this new potential benefit] and MA plans to offer it,” she told SHN.
The conventional wisdom is that MA providers will be incentivized to control costs through this benefit, but providing ongoing personal care services is not cheap, she noted, adding that the Medicare Advantage business model for most insurers is based more on enrollment volume than cost control.
UnitedHealthcare, Humana and Aetna—three of the largest Medicare Advantage providers—had not responded to requests for comment from SHN as of press time.
Insurance actuaries are likely in wait-and-see mode at the moment, pending further guidance from CMS. That should be coming in the near future, considering that MA providers have to submit 2019 plan designs and bids to CMS by early June.
“From our conversations with MA plans, finalizing the plan benefit design and pricing impact needs to be concluded by end of April,” Darby Anderson, chief development officer with Addus HomeCare (Nasdaq: ADUS), told SHN. Frisco, Texas-based Addus is a large provider of personal home care services, and is bullish on the new flexibility in benefits—however, Anderson believes that the impact will likely start small in 2019 and then evolve.
The wording of the CMS call letter itself supports this idea. There are some restrictions governing the new benefit, including that it must “address specific illnesses and/or injuries.”
However, the letter also notes that provisions of the Bipartisan Budget Act of 2018, passed in February, further expand supplemental benefits in Medicare Advantage. Under this law, MA plans will be permitted to offer even more varied benefits packages to chronically ill people, starting in 2020.
Compared to the changes coming in 2019, this law is going to have a more profound impact on bringing more personal care services under the MA umbrella, in Tumlinson’s view—and it’s conceivable that insurers will wait until 2020 to make notable updates to their plans.
Yet, Medicare Advantage companies will be engaged by a variety of stakeholders pushing for personal care benefits to be implemented.
Katzmann and Tumlinson are among this group, as are large in-home care providers such as Addus; Louisville-based ResCare; Baton Rouge, Louisiana-based Amedisys (Nasdaq: AMED); and Lafayette, Louisiana-based LHC Group (Nasdaq: LHCG). All of them have been building up their Medicare Advantage lines of business in recent years, and see personal care services as a key value-driver they offer to these insurers.
And there are consumer preferences to take into account; insurers are sensitive to their customers, not wanting to lose enrollees. There’s no doubt that older adults want benefits to help them age in place, including in a senior living community that has become their home.
“Changes in benefits are never straightforward, but I think this is something that we in the industry have seen as being as close to a no-brainer as you can get,” Avalere’s Bentley said. “You’re delivering a service and the level of care that beneficiaries want and need, where they want it.”
Written by Tim Mullaney