Medicare Advantage Plans Cost $8.5 Billion More than
Traditional Medicare in 2008
Extra payments pushed to $33 billion since 2004, will
remain significant even after payment reductions in new legislation
Sept.
5, 2008 - Private Medicare Advantage (MA) plans will be paid an average
12.4 percent more per enrollee in 2008 compared to what the same
enrollee would have cost in the traditional Medicare fee-for-service
program. The cost to Medicare, according to a new report from The
Commonwealth Fund, will be $8.5 billion in 2008, pushing the extra cost
from 2004 to $33 billion.
Even if the payment reductions to MA plans mandated
by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)
scheduled to take effect beginning in 2010 had been fully in place
in 2008, MA plans still would have been paid 10.6 percent more than
expected fee-for-service costs.
Extra payments to MA plans will amount to $986 over
fee-for-service costs for each of about 8.7 million Medicare
beneficiaries enrolled in Medicare Advantage plans, according to the
estimate by Brian Biles, professor of health policy at George Washington
University, and colleagues.
The total will be more than $8.5 billion in 2008
up from $3.9 billion in extra payments, or $795 per MA enrollee in 2004.
Extra payments to MA plans between 2004 and 2008 will total nearly $33
billion.
The bulk of these extra payments were mandated by
the Medicare Modernization Act of 2003, which was intended to expand the
role of private plans in Medicare in an effort to reduce growth in
Medicare spending. Since 2004, MA plan enrollment has increased from 4.8
million to the current 8.7 million.
"The legislation passed this year only partially
addresses the overpayment problem in Medicare Advantage, and private
plans still substantially raise the cost of serving Medicare
beneficiaries," said Commonwealth Fund President Karen Davis.
"Policymakers should carefully examine whether extra payments to
Medicare Advantage plans are the best use of dollars for the
beneficiaries the program is designed to serve."
The authors of the report, The Continuing Cost of
Privatization: Extra Payments to Medicare Advantage Plans in 2008, note
that eliminating extra payments to private plans could be used for other
purposes, such as offsetting the costs of Medicare policy improvements,
which may include: slowing the increase in the Part B premium that
Medicare beneficiaries pay, increasing eligibility for low-income
subsidies in Medicare, or improving benefits and financial security for
all beneficiaries.
"Medicare Advantage was intended to save the
program money through the use of private plans. However, extra payments
to these plans combined with rapidly increasing enrollment, has resulted
in $33 billion in additional spending over the past five years," said
Biles. "These overpayments put pressure on both Medicare and the federal
budget, drain resources from other, potentially more productive, uses,
and dilute the incentive for Medicare Advantage plan efficiency which
was one of the original reasons for including a private plan option in
Medicare."
Editors Notes:
The Commonwealth Fund is a private foundation
supporting independent research on health policy reform and a high
performance health system.
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Sept.
5, 2008 - Private Medicare Advantage (MA) plans will be paid an average
12.4 percent more per enrollee in 2008 compared to what the same
enrollee would have cost in the traditional Medicare fee-for-service
program. The cost to Medicare, according to a new report from The
Commonwealth Fund, will be $8.5 billion in 2008, pushing the extra cost
from 2004 to $33 billion. 