A new report from Physicians for a National Health Plan (PNHP) reveals that the federal government is overpaying health insurance corporations offering Medicare Advantage plans as much as $140 billion in 2023. Matthew Cunningham-Cook and Lucy Dean Stockton report for Jacobin on PNHP’s report and the four ways the government overpays for Medicare Advantage at the same time that the Medicare Advantage plans engage in inappropriate delays and denials of care and coverage.
The total annual Medicare Advantage overpayments would cover the full annual cost of part B premiums for everyone with Medicare, which usually is taken out of people’s Social Security checks. People with Medicare typically are left with about $1,600 in Social Security benefits. Not only are people with Medicare paying more than they should as a result of the Medicare Advantage program, the insurers offering Medicare Advantage plans, including UnitedHealthcare, Cigna and Humana, are “quietly plundering the the Medicare Trust Fund,” says Ed Weisbart, a physician who serves as PNHP’s secretary.
With traditional Medicare, administrative costs are less than two percent and no one is profiting. With Medicare Advantage, insurers receive for each enrollee about 119 percent of what the government spends on enrollees in traditional Medicare because they are able to game the system.
To be clear, Congress established Medicare Advantage, Part C of Medicare, arguing that it would save Medicare money. To the contrary, it has always cost more than traditional Medicare. The Medicare Advisory Payment Commission or MedPac has documented some of the overpayments.
In short, the payment system to Medicare Advantage plans is defective, leading to gross overpayments. As bad, it makes it more profitable for the insurers offering Medicare Advantage to delay and deny care. The government pays them the same amount regardless of how much they spend on people’s care.
Consequently, evidence abounds regarding people enrolled in Medicare Advantage who suffer and die prematurely because they are unable to get the care they need. They wait so long to get prior authorization from their Medicare Advantage plan that it is too late for them to get the treatment they need. Or, the Medicare Advantage plan denies them the needed treatment. Or, the Medicare Advantage plan has no top cancer providers in its network and they are either forced to get lower quality care or pay the full cost of care themselves.
People are generally locked into their Medicare Advantage plans once they join, even though they are told that they can switch back to traditional Medicare each year during the open enrollment period. Because traditional Medicare does not have an out-of-pocket limit, they do not want to take the risk of signing up for it without also getting supplemental coverage to protect them from financial liability. But, insurers do not have to sell them this insurance except in limited situations after they first enroll in Medicare and, if the insurers are willing to sell them insurance, they can often charge astronomical prices for the coverage.
In addition, hospitals and physicians can drop their contracts with Medicare Advantage plans as they will. And, they are doing so. The CEO of Scripps, a health system in California says: “We are a patient care organization and not a patient denial organization and, in many ways, the model of managed care has always been about denying or delaying care — at least economically.”
Scripps is not alone. Throughout the country, in myriad states, including Ohio, Virginia, Oregon, Missouri, Oklahoma, and South Dakota, hospitals and physicians have pulled out of their Medicare Advantage contracts because of patient safety concerns, inappropriate denied claims and prior authorization headaches.
- By marketing to and enrolling disproportionately more healthy people than traditional Medicare. Healthy people cost them very little, but the government still pays them around $12,000 for each healthy person. When people get sick and go without care because they can’t afford the copays in Medicare Advantage or can’t find a physician to provide them the care they need, the Medicare Advantage plans continue to profit. MedPAC says that Medicare Advantage plans receive about $44 billion to $56 billion more than they should as a result.
- By adding diagnoses codes to enrollee medical records, even when the enrollee is not getting more care, so that the government pays them more for these enrollees. This practice is called “upcoding.” And, it leads to $27 billion more in spending in 2023.
- By receiving bonuses for serving certain communities and based on quality benchmarks. But, neither are appropriate, according to MedPAC. Currently, Medicare provides bonuses to Medicare Advantage plans based on the locations they cover, supposedly to ensure equal geographic access to coverage. These overpayments total around $24 billion a year.
- By requiring their enrollees to pay part of the cost of their care each time they get care. Consequently, people in Medicare Advantage tend to forego care more often than people in traditional Medicare. The vast majority of people in traditional Medicare have supplemental coverage that relieves them of the need to pay anything beyond the cost of coverage for their care. So, people with traditional Medicare end up getting more care than people in Medicare Advantage, but the government pays Medicare Advantage plans as if their members get the same amount of care as people in traditional Medicare. This adds an additional $36 billion in overpayments.
Here’s more from Just Care:
- Ignore Medicare Advantage ads; they misrepresent costs and benefits
- If you’re in a Medicare Advantage plan, watch out! Your doctor or hospital might no longer be in-network
- People in Medicare Advantage struggle to afford their care
- What happens when a Medicare Advantage plan endangers people’s health?
- Be a Hero tells Congress to end Medicare Advantage wrongful delays and denials of care
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