Instead of gutting Medicaid, Congress could save $1 trillion by ending hundreds of billions of dollars in overpayments to corporate health insurers in Medicare Advantage. A new report by Arnold Ventures details how our federal government could effectively end Medicare Advantage and other health care wasteful spending, save as much as $4 trillion, and not touch Medicaid spending.
The Arnold Venture report spells out 10 ways for Congress to spend less and 10 ways to close tax loopholes that could pay for a permanent extension of the 2017 Tax Cuts and Jobs Act (TCJA). It proposes four smart ways to spend less on health care.
Arnold Ventures recommends fixing the broken Medicare Advantage payment system that leads to as much as $140 billion a year in overpayments to corporate health insurers. Insurers use a variety of methods to maximize government payments, including “upcoding.” Insurers add diagnosis codes to enrollees’ medical records, which allows them to bill Medicare at higher rates for these enrollees, even when the insurers provide no additional services to these enrollees. The government could adjust down the rate it pays insurers to reduce overpayments significantly. This policy could save as much as $1 trillion over 10 years.
If Congress ended overpayments to health insurers, the health insurers would claim that the government was “cutting” people’s Medicare benefits. But, the government would still be spending as much on enrollees in Medicare Advantage as in Traditional Medicare. The government would simply be reducing fraud and waste.
Arnold Ventures recommends “site-neutral payments,” a policy that would require Medicare to pay the same amount for care in a hospital setting as for care in a physician’s office. For reasons that make little sense other than bolstering hospital coffers, today Medicare pays hospitals as much as four times more when a service is performed in a hospital setting. Hospitals have gamed the Medicare payment system by buying physicians’ practices; they can then legally charge the hospital outpatient rate for services, even though the services are identical to what they were before the hospital owned the practices.
A few years ago, Congress limited the ability of hospitals to continue to game the Medicare payment system through purchases of physician practices. But, Congress grandfathered in the higher rates for hospital outpatient clinics established before the law passed. Ending this grandfathering provision alone would save $30 to $40 billion over ten years.
Shockingly, the current Medicare payment system still creates an incentive for hospitals to steer patients to get care in a hospital setting, even when the service can be provided at far lower cost in a physicians’ office. Site-neutral payments could save as much as $157 billion over ten years. It would also lower out-of-pocket costs for people with Medicare.
Arnold Ventures recommends penalizing pharmaceutical companies if they raise the price of their drugs above the rate of inflation for people in the commercial marketplace. The Inflation Reduction Act enacted this policy for Medicare and Medicaid but not for working people. This policy could save the federal government as much as $40 billion over 10 years.
Arnold Ventures supports requiring Medicaid managed care plans to pay hospitals and nursing homes no more than the Medicare rate.
Today, states can direct Medicaid managed care plans to pay hospitals and nursing homes at “average commercial rates.” Those rates are far higher than the Medicaid fee-for-service rates. They also incentivize hospitals with monopoly power to increase their rates, which are already twice Medicare rates. Medicaid managed care plans should not be allowed to pay hospitals and nursing homes more than the Medicare rates. This policy would save as much as $120 billion over 10 years.
Here’s more from Just Care:
- Dozens of drug companies owe Medicare rebates from raising prices higher than the inflation rate
- To save billions, federal government should set hospital rates
- New OIG report finds taxpayers pay billions extra for Medicare Advantage insurers’ in-home visits
- Biden administration penalizes drug companies hiking drug prices above the rate of inflation
- Access to care a serious problem in Medicaid managed care plans
Leave a Reply