Expanding Supplemental Benefits In Medicare Advantage: Barriers To Adoption And Opportunities To Accelerate

Supplemental benefits, which have been a core value proposition of the Medicare Advantage (MA) program for years, are evolving. These special “non-medical” benefits—not provided by traditional Medicare but commonly offered by MA plans—have contributed to the significant growth of MA. More than one in three Medicare beneficiaries are now enrolled in MA plans, a 50 percent increase from 2010.

Traditionally, the scope of supplemental benefits was narrowly restricted to “primarily health-related” services, such as vision, hearing, and dental care. However, through regulatory changes in 2018 and 2019, the Centers for Medicare and Medicaid Services (CMS) expanded that scope to include benefits that support daily maintenance of health and address social determinants of health for beneficiaries with chronic disease. Consequently, MA plans now have more flexibility to offer benefits for meal and grocery delivery, non-medical transportation, and other social needs.

While these flexibilities were universally praised by payers and other stakeholders, adoption of new benefits has been slow for several reasons, including the difficulty of demonstrating returns on investment, fragmented vendor markets, and other challenges. In this post, we explore the initial growth of these benefits, offer a framework to assess new benefits, and apply this framework to explore why adoption has been slow. We then consider opportunities to accelerate adoption, building on successful models from leading payers and other contexts.

A Brief History

The adoption of new supplemental benefits in response to new flexibilities was initially slow. In 2019, the first year that the definition of “primarily health-related” benefits was expanded to include services that improve quality of life (for example, respite care), only 21 percent of MA enrollees were in a plan that offered a new benefit. For the 2020 benefit cycle, CMS allowed a new type of “not primarily health-related” benefit designed for social needs, the Special Supplemental Benefit for the Chronically Ill (SSBCI). At the start of the cycle, fewer than 5 percent of plans offered one. Interviews with MA plan representatives confirmed a nuanced reluctance to expand such benefits, despite broad agreement about the importance of social needs.

One service newly allowed by the 2019 redefinition of health-related benefits is non-skilled in-home support: a set of services that assist with activities of daily living (ADLs) such as dressing, eating, and cleaning and instrumental activities of daily living (IADLs) such as managing finances and medications. By assisting with ADLs and IADLs, in-home support helps seniors “age in place”—so they can remain at home instead of moving into assisted living facilities as they grow older. According to the Henry J. Kaiser Family Foundation, at the start of the 2020 benefit cycle, only 4 percent of MA enrollees were in plans with a benefit for non-skilled, in-home support.

Despite a slow start, adoption appears to be growing quickly. A recent Avalere analysis showed that 27 percent of MA plans will provide in-home support services in 2021, compared to 21 percent in 2020. Notably, many MA plans took advantage of CMS regulatory flexibility in 2020, which permitted plans to provide mid-year benefit enhancements to promote physical distancing during the coronavirus pandemic, including meal and grocery delivery. Much of this additional adoption may persist into 2021, particularly if the new benefits sustainably create long-term value for the MA plans.

As adoption increases and the industry of supplemental benefit vendors grows, understanding how plans evaluate new benefits is a useful exercise. As insurance companies jockey for market share in MA, they must balance both growth and profitability, and product design can be a key differentiator. For new benefits to have staying power, they must create value for health plans by growing either the “bottom line” (profit margin) or the “top line” (premium revenue from total number of members enrolled).

Growing The Bottom Line

The bottom line of a health insurer reflects the medical loss ratio (MLR), the proportion of premium revenues being spent on medical care. Remaining premium revenue covers administrative, marketing, and other operating expenses, with the rest being profit. CMS allows payments from MA plans to non-medical providers for supplemental benefits to be applied toward their 85 percent MLR requirement. Therefore, plans may materially benefit from providing non-medical services that reduce overall medical cost. This incentive is particularly strong for MA plans since they receive premiums in the form of risk-adjusted, capitated payments from CMS.

The key question related to the bottom line is whether newly offered non-medical services deliver a return on investment (ROI) for the plan. Will these services save more money than they cost to deliver in any given year? New benefits could generate savings by preventing the need for acute medical care. If emergency department visits, hospital admissions, or other forms of acute care are sufficiently reduced, the savings could theoretically exceed the costs of providing the benefit, yielding a positive ROI. While this argument is powerful conceptually, it has proven challenging in practice.

A key obstacle in the pursuit for ROI of a new benefit is attribution of savings—how can a plan ascertain that any observed reductions in use are due to the new benefit? While academics employ randomized trials to answer this type of question, such methods are not frequently available in real-world settings. Despite some evidence linking meal delivery, transportation, and other services to lower use of acute care, many health care leaders note that it has been difficult to demonstrate ROI for these interventions. Concerns about rapidly increasing costs in the short term from the new benefits without any guarantee of medical cost offsets is a barrier to adoption. Moreover, actuaries—as well as CMS—require ROI within the plan year, but investments in social needs may only pay off years into the future.

Certain supplemental benefits could also lead to increased use of low-value medical care, reducing the chance for positive ROI. In-home support services, for instance, involve sending non-skilled staff to patients’ homes, creating the risk of mis-triage of commonly encountered medical conditions. A patient with heart failure complaining of leg swelling may be directed to the emergency department instead of primary care by an untrained home health aide who is not integrated with the medical team.

Expanding The Top Line

While profitability is important for MA plans, growth and member retention are also imperative. Some benefits may be adopted for the purpose of attracting new enrollees and increasing top-line revenue. Indeed, studies have shown that plan enrollment and market penetration correlate with the generosity of supplemental benefits available to members.

For benefits to drive long-term top-line growth, they must improve member satisfaction. Beyond attracting more beneficiaries, increased satisfaction also increases revenue per beneficiary by improving CMS star ratings. Unfortunately, many local vendors that provide these supplemental benefits on the ground deliver inconsistent service. Often, these vendors are grant-funded community-based organizations and thus have little incentive to standardize high-quality services, producing an erratic and sometimes unreliable experience for members.

Another challenge is raising awareness of new benefits among potential and existing members. In a recent survey, 60 percent of MA beneficiaries indicated extra benefits such as transportation would be motivators to choose a plan. However, only 27 percent of those same respondents were aware transportation was a covered benefit under their existing plan. Even as awareness improves, the complexity of plan choices for MA beneficiaries can be overwhelming, often resulting in suboptimal decisions.

Marketing of complex and often confusing benefits such as SSBCI also presents challenges for MA plans. If cumbersome eligibility guidelines are not included in advertisements, beneficiaries may be misled into signing up for a plan without their desired benefits. In addition, several plans note that CMS allows targeted marketing of benefits based on clinical criteria but not based on the social needs that are more readily identifiable to beneficiaries.

Most importantly, new benefits pose tradeoffs—adding a benefit often requires reducing or removing another benefit to pay for it. In this “zero sum” game, insurers may hesitate to curtail familiar benefits (for example, dental) to take a risk on unproven ones, especially given the potential impact on member satisfaction.

Increasing Adoption Of New Supplemental Benefits

With continued maturity of this emerging market segment—accelerated by COVID-19-related changes—and the entry of startup companies looking to facilitate adoption, we expect MA plans will increasingly adopt these new supplemental benefits. Drawing on insights from successful models, the following strategies provide a roadmap and highlight opportunities for plans, vendors, and new entrants.

Adopt Innovative Benefits

Creatively constructed, new benefits can be powerful tools for growing both the top line and the bottom line. For example, adult day health services, a recently allowed supplemental benefit, could be conceived not only as respite for caregivers but also as a cure to social isolation. As part of its Bold Goal program, Humana deployed a pilot program to connect seniors with college students that reduced loneliness by 21 percent and increased the number of healthy days for members in the program. Such an initiative could be expanded as a companionship benefit under SSBCI, which Humana plans to offer in 2021. By increasing satisfaction, this program may also improve member retention and plan loyalty.

Partner With Risk-Bearing Providers

One way to increase the prospect of ROI on supplemental benefits may be to integrate the provision of these new services with a beneficiary’s medical team. Coordination between in-home support staff and clinicians can prevent unnecessary use by facilitating triage of acute concerns. High-performing dual-eligible health plans—plans that provide benefits for members who are dually eligible for Medicare and Medicaid—frequently provide access to non-medical services and often rely on this integration. Commonwealth Care Alliance (CCA), a payer-provider caring for dual-eligible populations in Massachusetts, is one such model. CCA has provided social support services in the home for its members for years, generating consistent savings through reduced hospital and nursing home use. Plans could seek partnerships with delegated provider organizations to achieve the close linkage between non-medical services and clinicians that underlies this success. Simply contracting out services may be insufficient—harmonizing the provision of non-medical services with clinical care is the goal.

Segment The Member Population

Another way to maximize the chance for ROI is to use flexibilities under SSBCI to direct these new services to the at-risk patients who most need them. One study conducted on a dual-eligible population showed that when medically tailored meal delivery is targeted to the most food-insecure patients, it results in fewer emergency department visits, fewer inpatient admissions, and lower medical spending. Akin to population health management, new benefits may require analytics to inform targeted delivery of specific interventions. While health insurance claims alone can be used for member medical risk stratification, clinically sourced data, such as needs assessments collected during clinical encounters, can drive more precise segmentation in these novel areas.

Identify Best-In-Class Vendors

A key ingredient for successful adoption of new supplemental benefits is partnerships with best-in-class vendors for meal delivery, in-home support, and other services. Determining the quality of a fragmented and inconsistent vendor landscape can be resource intensive but is critical as many vendors cannot meet the rigorous standards Medicare attributes to their supplier networks. Plans must screen vendors—often community-based organizations—in each local market for value, quality, and credentialing. To increase capital efficiency, plans may opt to outsource these tasks to brokers that streamline contracting for health plans. For instance, Humana uses Logisticare to provide rides for beneficiaries. Such brokers could evolve to become aggregators and play similar roles as existing companies do for other supplemental benefits, such as Tivity’s Silver Sneakers, which aggregates gym memberships for a fitness benefit. A separate breed of companies may be needed to help small community-based organizations, which lack the relevant infrastructure and resources, contract with plans to provide their services.

Establish A Consumer-Driven Benefit Design

Concerns about widespread adoption of benefits within a beneficiary population without offsets can be mitigated through thoughtful benefit structure and navigation. For example, MA plans could define their contribution for in-home support as a certain number of dollars per month, akin to a deductible for the supplemental benefit. Alternatively, plans could offer a “menu” of newly available services and use social workers or navigators to help seniors choose the two or three benefits they value the most. These approaches maintain the top-line gains of new benefits while mitigating any risks they pose for the bottom line.

Looking Forward

While many MA plans expanded benefits during COVID-19, it is unclear in which form they will persist beyond the pandemic. Provided that CMS continues to build on recent pandemic-related regulatory flexibilities, we anticipate continued increases in adoption. We expect MA plans and vendors to continue to experiment with various mechanisms of providing new supplemental benefits to their beneficiaries in the coming years. The above strategies may help assess—and accelerate—adoption and sustainability of new supplemental benefits, which may become “must haves” in the post-COVID-19 era.

Authors’ Note

The authors acknowledge Stephanie Franklin and John Loughnane for their input and feedback on this post. Suhas Gondi has received consulting fees from Commonwealth Care Alliance.