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Dispatches

Combating Medicare Advantage Plan Overpayments

A study looking at the difference in spending between those who switch to Medicare Advantage plans and those who stay in traditional Medicare plans found that those who switched spent less than those who did not.

by Anine Sus | July 2019


A study looking at the difference in spending between those who switch to Medicare Advantage plans and those who stay in traditional Medicare plans found that those who switched spent less than those who did not.

People who were originally in a traditional Medicare plan and switched to Medicare Advantage in 2016 spent $1,253 less in 2015 than those who stayed in a traditional Medicare plan. This decrease in spending was consistent among those with the same chronic condition: enrollees with diabetes spent $1,072 less; those with asthma spent $1,410 less; and those with breast or prostate cancer spent $1,517 less.

As background, the study’s authors state that “Medicare payments to Medicare Advantage plans have always been based on Medicare spending by similar people in traditional Medicare, partly because Medicare has never had accurate, complete data on the use of services or health care spending for beneficiaries in Medicare Advantage plans.” However, the study’s data showed that people enrolled in Medicare Advantage plans don’t use as many services and spent less on average in their traditional plan prior to switching. Therefore, using the traditional Medicare plan spending as a guide for Medicare Advantage plan spending overestimates how much those enrolled in Medicare Advantage plans will spend. By this logic, Medicare will “overpay plans by billions of dollars over the next decade.”

The average difference in Medicare spending of $1,253 is almost four times more than the bonus payment of $336 that is paid to Medicare Advantage plans that qualified in 2015. The study’s authors suggest that health care policymakers review the process of determining Medicare Advantage plan payments. If the payments were compared to how much an enrollee paid for health care in their traditional Medicare plan prior to switching to Medicare Advantage, this could reduce Medicare spending overall and lower Medicare Part B premiums and deductibles for all 20 million Medicare beneficiaries.

Source: “Do People Who Sign Up for Medicare Advantage Plans Have Lower Medicare Spending?” by Gretchen Jacobson, Tricia Neuman and Anthony Damico; Kaiser Family Foundation, May 2019.

Discussion

David from CA posted over 7 years ago:

This is further proof that private companies are more efficient than the government as private companies have inserted themselves and yet still save the government and the individuals money while making a profit. Some people are working hard to eliminate all private insurance companies and force everyone to a single government plan.


Mark from NJ posted over 7 years ago:

Hold on. What does it mean, that MA people 'spend less' than M people? NOT that MA is more efficient! NOT that private co's make profit and still save the govt money. It may mean nothing at all. It may mean that private co's make it harder for people to get care, discouraging them from getting as many services. It may just mean that MA people are poorer than M people, and spend less. All in all, this article reports a study that by itself, means very little. Don't give in to prejudices about govt v. private.


blaine from WA posted over 7 years ago:

The difference could be as the authors claim, or it could be bad data on 'unswitchers' or it could be age, or it could be adverse selection because more affluent, astute better educated choose to switch. There is not enough background on the study or detail in the article as displayed to draw any conclusion.


Neil from OH posted over 7 years ago:

two observations. First, those with good health do often switch but it also goes in reverse. Second, ALL of my friends on advantage plans choose to not go to the Dr. for certain things because of the copay. I myself at 74 have twice calculated that I'm better off with plan G and probably have better health security. I also have no problems when I travel unlike some advantage plans The article was very narrow in its scope.


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