Extra payments to Medicare Advantage plans to total $11.4 billion in 2009

May 04, 2009

Private Medicare Advantage (MA) plans will be paid $11.4 billion more in 2009 than what the same beneficiaries would have cost in the traditional Medicare fee-for-service program, according to a new report released today by The Commonwealth Fund. This new analysis, The Continuing Costs of Privatization: Extra Payments to Medicare Advantage Plans Jump to $11.4 Billion in 2009, estimates that since MA was enacted in 2004, $43 billion in extra payments have been made.

In the report, Brian Biles, professor of health policy at George Washington University and colleagues find that extra payments to MA plans will amount to an average of $1,138, or 13 percent over fee-for-service costs, for each of about 10 million beneficiaries enrolled in Medicare Advantage plans. The $11.4 billion in extra payments in 2009 represents a 34 percent increase over 2008 payments, which totaled $8.5 billion. According to authors, the steep one-year increase was due to the increase in payment rates and enrollment in the private MA plans.

The bulk of these extra payments were mandated by the Medicare Modernization Act of 2003, which was intended to expand the role of in Medicare in an effort to reduce growth in Medicare spending. Since 2004, MA plan enrollment has increased from 4.8 million to the current 10 million.

"It is clear that private plans are continuing to substantially raise the cost of serving ," said Commonwealth Fund president Karen Davis. "Modifying these payments in 2010 is an excellent first step, but policymakers should examine whether or not these plans are the best use of Medicare dollars for the beneficiaries they were designed to serve."

The Congressional Budget Office estimates that bringing MA payments in line with traditional fee-for-service Medicare would save $157 billion over the next 10 years. Recent steps taken by the Centers for Medicare and Medicaid Services that reduce the payments made to private MA plans in 2010 do not address the factors responsible for the $11.4 billion in extra payments, the authors say.

The authors note that funds saved by eliminating extra payments to private plans could be used for other purposes, such as offsetting the costs of Medicare policy improvements—including reducing the Part B premiums that Medicare beneficiaries pay or increasing eligibility for low-income subsidies in Medicare Part D—or offsetting part of the cost of expanding health insurance to the 47 million uninsured.

"Right now we are spending billions of dollars on extra payments for a limited group of Medicare beneficiaries." said Biles. "These plans haven't realized the cost savings they were initially intended to create, and the extra spending will continue to increase even with the new CMS payment policies in place in 2010. We have to ask ourselves if this is the best use of our health care dollars or if those dollars could be better spent improving Medicare benefits for all beneficiaries or expanding health insurance coverage."

Source: Commonwealth Fund (news : web)

Explore further: AMA examines economic impact of physicians

add to favorites email to friend print save as pdf

Related Stories

Medicare drug plan changes affect seniors

Oct 04, 2006

U.S. officials say changes in the Medicare prescription drug plan for next year will include more choices and better coverage especially in the "doughnut hole."

Seniors in Medicare's doughnut hole decrease use of meds

Feb 03, 2009

Beneficiaries enrolled in Medicare Part D who reached a gap in health care coverage known as the "doughnut hole" were much less likely to use prescription drugs than those with an employer-based plan, according to a University ...

More drug providers enter Medicare market

Oct 02, 2006

Insurers were allowed to begin advertising their plans for Medicare prescription drug coverage Sunday, even as new providers were poised to enter the market.

Recommended for you

AMA examines economic impact of physicians

13 hours ago

(HealthDay)—Physicians who mainly engage in patient care contribute a total of $1.6 trillion in economic output, according to the American Medical Association (AMA)'s Economic Impact Study.

Less-schooled whites lose longevity, study finds

13 hours ago

Barbara Gentry slowly shifts her heavy frame out of a chair and uses a walker to move the dozen feet to a chair not far from the pool table at the Buford Senior Center. Her hair is white and a cough sometimes interrupts her ...

How to keep your fitness goals on track

14 hours ago

(HealthDay)—The New Year's resolutions many made to get fit have stalled by now. And one expert thinks that's because many people set their goals too high.

Suddenly health insurance is not for sale

Apr 18, 2014

(HealthDay)— Darlene Tucker, an independent insurance broker in Scotts Hill, Tenn., says health insurers in her area aren't selling policies year-round anymore.

User comments : 0

More news stories

Cancer stem cells linked to drug resistance

Most drugs used to treat lung, breast and pancreatic cancers also promote drug-resistance and ultimately spur tumor growth. Researchers at the University of California, San Diego School of Medicine have discovered ...

Finnish inventor rethinks design of the axe

(Phys.org) —Finnish inventor Heikki Kärnä is the man behind the Vipukirves Leveraxe, which is a precision tool for splitting firewood. He designed the tool to make the job easier and more efficient, with ...

Making graphene in your kitchen

Graphene has been touted as a wonder material—the world's thinnest substance, but super-strong. Now scientists say it is so easy to make you could produce some in your kitchen.