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: Synthetic pot sends hundreds to ERs in past month

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

India's bidi workers suffer for 1,000-a-day habit

16 hours ago

Zainab Begum Alvi and her band of young helpers hunch over baskets filled with tobacco flakes and dried leaves, trying to roll a thousand dirt-cheap cigarettes a day at the behest of India's powerful bidi barons.

Key to better sex ed: Focus on gender & power

Apr 17, 2015

A new analysis by Population Council researcher Nicole Haberland provides powerful evidence that sexuality and HIV education programs addressing gender and power in intimate relationships are far more likely ...

Journal tackles aging policy issues raised by White House

Apr 17, 2015

In anticipation of the forthcoming 2015 White House Conference on Aging (WHCoA), The Gerontological Society of America (GSA) has produced a special issue of The Gerontologist that outlines a vision for older adults' econom ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.