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Changes in Health Care Utilization and Low-Value Service Use After Risk-Based Contract Adoption in Medicare

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Risk-based payment contracts in Medicare Advantage did not consistently change health care use or low-value services. Further research is needed to understand why these payment models had uncertain effects on utilization and value.

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Area of Science:

  • Health economics
  • Health services research
  • Value-based care

Background:

  • Risk-based payment contracts aim to improve healthcare value but their impact on utilization and low-value services in Medicare Advantage is not well understood.
  • Limited evidence exists on how contract design features influence outcomes in Medicare Advantage, a sector with high adoption of these payment models.

Purpose of the Study:

  • To assess if voluntary transitions to upside-only or two-sided risk-based contracts were associated with changes in healthcare utilization or low-value service use.
  • To investigate the impact of different risk-based contract designs on healthcare delivery within Medicare Advantage.

Main Methods:

  • Retrospective cohort study analyzing claims data from a national Medicare Advantage insurer (Humana) from 2015-2021.
  • Difference-in-differences analysis comparing organizations transitioning to risk-based contracts with control organizations.
  • Examined nine utilization measures and 26 measures of low-value service use across various healthcare domains.

Main Results:

  • Transitioning to upside-only risk contracts showed a small, significant reduction in emergency department visits and cardiovascular stress testing after accounting for pre-transition trends.
  • Transitioning to two-sided risk contracts did not show significant sustained reductions in utilization after accounting for pre-transition trends.
  • Neither contract type was associated with significant changes in the overall use of low-value services.

Conclusions:

  • Voluntary adoption of risk-based payment contracts in Medicare Advantage was not consistently associated with significant changes in healthcare utilization or the use of low-value services.
  • The factors driving the lack of substantial impact from these contracts on healthcare value remain uncertain.
  • Further investigation is required to understand the nuances of contract design and implementation that may influence their effectiveness.