The Medicare Advantage program, which enables Medicare beneficiaries to get healthcare through plans managed by commercial insurance firms, has seen enrollment increase so quickly that it recently overtook standard Medicare enrollment.
The urgent need for reform is highlighted by a new report by USC academics that warns that overpayments to Medicare Advantage plans already surpass 20%, or $75 billion annually.
MedPAC Estimates Excessive Bonus Will Overpay 2023 Medicare Advantage Plans
Millions of beneficiaries of conventional Medicare who have migrated to Medicare Advantage plan have lower spending than those who have stayed with similar health risks, according to researchers.
They claim that the Medicare Payment Advisory Commission’s (MedPAC) earlier estimates of overpayments more than doubled as a result of this pattern of favorable selection.
Those estimates had taken into account aggressive coding of enrollee health conditions as well as some easily attainable quality-related bonus payments, but had not taken into account favorable selection.
The Centers for Medicare and Medicaid Services (CMS) determines Medicare Advantage payments based on county-level expenses drawn from claims data for people continuing to receive traditional Medicare, rather than spending data for Medicare Advantage—a payment system that is causing worry.
MedPAC, Medicare Advantage plans would be overpaid by $27 billion (6%) in 2023 as a result of excessive Star Rating (quality) bonuses ($23 billion) and coding inconsistencies.
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Medicare Advantage Participants Showed Lower Expenses
This estimate, however, does not account for the effects of spending variations between Medicare Advantage enrollees and those who stick with regular Medicare.
The researchers discovered that participants of Medicare Advantage had much lower expenses than those still enrolled in traditional Medicare who shared the same risk factors.
Just counting the 29.5% (7.1 million) of Medicare beneficiaries who moved to MA in 2015-2019, payments to plans for these beneficiaries were twice their estimated expenditures in 2020, when 46.9% of participants in Medicare Advantage migrated from regular Medicare between 2006 and 2019.
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