In a concise online memo, the Medicare Payment Advisory Committee, MedPAC, responded to health insurance industry misinformation about Medicare Advantage–the private insurance program offering Medicare benefits. MedPAC makes clear that Medicare Advantage has always cost taxpayers more per person than traditional Medicare. The memo should be a wake-up call to Congress and the administration that it is time to do away with Medicare Advantage plans or, at the very least, revise the way they are paid.
According to MedPAC, when compared properly, “Medicare spends more overall for enrollees in Medicare Advantage than the program would have spent for similar beneficiaries enrolled in traditional FFS Medicare.” MedPAC’s memo says explicitly that AHIP, the trade association representing the insurers offering Medicare Advantage plans, incorrectly represented Medicare Advantage plan costs in a recent blog post. And, AHIP inaccurately described how MedPAC calculates those costs.
Since 2004, MedPAC has been comparing spending levels in Medicare Advantage and traditional Medicare. In so doing, it first ensures it is making an apples-to-apples comparison. It adjusts its calculations based on differences in people’s health status, physical location, and diagnoses, as well as services covered. And, every year, MedPAC finds that Medicare Advantage spending has been higher than traditional Medicare spending.
In some years, Medicare Advantage spending has been significantly higher than traditional Medicare spending. MedPAC goes out of its way to say that its conclusion should not suggest that Medicare Advantage plans are inefficient. (Based on other MedPAC materials, Medicare Advantage plans spend 87 percent of what traditional Medicare spends on Part A and B services, which could argue for its efficiency but also could suggest that it is inappropriately denying care.)
MedPAC believes that payments to Medicare Advantage plans should come down and is likely to recommend a Medicare Advantage spending cut, according to Michael Brady of Modern Healthcare. MedPAC commissioners believe plan rates are too high. In response to any spending cuts, Medicare Advantage plans would likely end or reduce the additional benefits they currently offer. Right now, Medicare Advantage plans allegedly put about 14 percent of their payments towards additional benefits, which all taxpayers pay for. And, that’s a problem.
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