Merrill Goozner writes for Gooznews about the disadvantage of Medicare Advantage, which is administered through corporate insurers. MedPAC, the agency that oversees Medicare, has warned that, if the government continues to overpay Medicare Advantage plans, Medicare’s financing is in serious jeopardy. MedPAC wants the Medicare Advantage payment system overhauled so health plans can’t simply take the government’s money and run.
Enrollment in Medicare Advantage is growing. People with lower incomes are more likely to enroll in Medicare Advantage to avoid having to buy Medicare supplemental insurance. Unlike traditional Medicare, Medicare Advantage has an annual out-of-pocket cap, albeit one that forces people to pay as much as $7,550 for their care.
And, though people who join Medicare Advantage are giving up choice of doctors, coverage anywhere in the country, and the freedom to access care without referrals and prior authorizations, they often get partial coverage for dental or hearing care and an out-of-pocket cap; the government pays Medicare Advantage plans about four percent more per person than it spends on traditional Medicare.
Medicare Advantage companies bid to offer their plans at about 15 percent less per person than traditional Medicare. They can afford to and still make a big profit since they tend to spend around 25 percent less on medical care than traditional Medicare by restricting access. Moreover, the government pays Medicare Advantage plans a higher rate if they can show more diagnoses for their enrollees–upcoding–even if the Medicare Advantage plans don’t provide enrollees with additional services. In 2020, these overpayments cost between $12 billion and $20 billion.
The government pays Medicare Advantage plans even more money in the form of “quality bonuses,” stemming from self-reported data. MedPAC says this data is of such low quality that it is of no good value.
The government is hard-pressed to collect back overpayments to Medicare Advantage. It must go to court to do so at substantial expense. Notwithstanding, 346 members of Congress, including progressives such as Ilhan Omar and Barbara Lee, seem to be ok with these overpayments, recently sending CMS a letter praising Medicare Advantage.
Medicare Advantage is incredibly profitable because of the high fixed capitated payments per member they receive regardless of whether they cover any care for the member. Private equity and venture-backed physician practices have entered that market, as well as the new direct contracting market in traditional Medicare, which also pays companies to cover people’s care on a capitated basis.
Goozner says that capitated payments “are the best way to incentivize providers to coordinate care, promote prevention, reduce hospitalizations, improve outcomes and prolong lives.” He cites no evidence that capitated payments do indeed lead to coordinated care, improved outcomes or longer lives. In fact, he concedes that the insurers’ “profits depend not on delivering better care but, for the majority of their enrollees, on narrowing networks and using traditional tools like prior authorization to discourage utilization regardless of its impact on outcomes.”
In fact, while capitated payments do lead insurers to deny coverage for hospitalization and a whole range of costly services, data from the Office of the Inspector General show that often they do so inappropriately, to maximize profits.
Goozner argues that fee-for-service payments can lead to overtreatment, which cannot be denied. But, fee-for-service payments can also help ensure that people get all the care that they need. In capitated health plans, undertreatment can be a big issue, particularly for people with complex conditions.
And, Goozner acknowledges that Medicare Advantage has not reduced the cost of care, just transferred money from physicians and hospitals to insurers. Goozner concludes that Medicare Advantage cannot continue in its current form, gouging taxpayers, with little oversight or accountability. Goozner does not say how Medicare Advantage should be overhauled. Meanwhile, Congress has no plan to overhaul it.
Congress needs to ensure that Medicare Advantage plans are not overpaid, cover all appropriate care and don’t spend their resources designing and implementing ways to avoid paying for costly care. One way to do so might be for it to dictate not only the benefits Medicare Advantage plans cover, but their coverage policies (so they don’t deny care inappropriately) and pay them based on the cost of services they cover. The Connecticut Medicaid managed fee-for-service model is worth exploring.
Here’s more from Just Care:
- Four things to think about when choosing a plan to fill gaps in Medicare, a “Medigap” or Medicare supplemental insurance plan
- Inappropriate Medicare Advantage care denials appear widespread
- Well-kept secrets of Medicare Advantage plans
- Four things to think about when choosing between traditional Medicare and Medicare Advantage plans
- How prior authorization requirements in Medicare Advantage could threaten your health
