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Medicare News
Medicare Advantage Plans Cost $5.2 Billion More than
Fee-for-Service in 2005
Eliminating extra payments could help pay for
enhanced benefits
December 1, 2006 - A report that is sure to add new
ammunition for the Democrats, who want to put an end to the money
Medicare is paying to private Medicare Advantage plans, says the MA
plans were paid an average 12.4% more per enrollee in 2005 compared with
what the same enrollees would have cost in the traditional Medicare
fee-for-service program.
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In the report from The Commonwealth Fund, Brian
Biles of George Washington University and colleagues estimate that extra
payments to MA plans amounted to $922 over fee-for-service costs for
each of about 5.6 million Medicare beneficiaries enrolled in Medicare
Advantage (MA) plans, for a total of more than $5.2 billion.
The bulk of these extra payments were mandated by
the Medicare Modernization Act of 2003, which were intended to expand
the role of private plans in Medicare.
"Medicare 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," said Commonwealth Fund
President Karen Davis. "These payments could instead be used to provide
better benefits and reduce out-of-pocket costs for seniors and the
disabled."
The authors of the report, The Cost of
Privatization: Extra Payments to Medicare Advantage PlansUpdated and
Revised, note that eliminating extra payments to private plans could
save Medicare a projected $30 billion over five years. They point out
that these funds could be used to:
● fill in the coverage gap, or doughnut hole, in
the drug benefit;
● create a viable alternative to the ineffective
sustainable growth rate mechanism currently used to determine the
physician payment update; or
● reduce the increase in the Part B premium in
2007 by about $10 per month for each beneficiary.
"While encouraging enrollment in private plans was
billed as a way to reduce costs for the program, Medicare Advantage in
fact costs Medicare money because of the extra payments," said Biles,
professor of health policy at George Washington University. "If
traditional Medicare and private plans are ever to compete fairly, they
need to compete on a level playing field, which would require the
elimination of these extra payments."
The Commonwealth Fund is a private foundation
supporting independent research on health and social issues.
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