The Medicare Payment Advisory Commission’s (MedPAC’s) proposal to mandate financial neutrality on a local level between Medicare Advantage (MA) plans and fee-for-service (FFS) Medicare ignores the different factors affecting costs for the private plans and the traditional program, Robert Berenson writes in a Health Affairs web exclusive published March 4. Berenson proposes a new method of setting the benchmarks against which MA plans bid in a way that reflects the different market dynamics faced by the two wings of the Medicare program.
The basic problem with MedPAC’s formulation of payment neutrality is that it “implicitly, but incorrectly, assumes that MA plans are subject to the same forces that determine traditional program spending,” says Berenson, a senior fellow at the Urban Institute who headed health plan contracting at the Centers for Medicare and Medicaid Services from 1998 to 2000. “The purest approach to establishing MA plan payments would be to have plans submit bids for providing a defined benefit package, without reference to preset benchmarks,” Berenson says. He advocates setting the benchmarks in accord with the empirical evidence that MA plans’ costs vary less than FFS plans’ costs.
In counties that have relatively low FFS costs, Berenson says that his model would be fairer to MA plans than MedPAC’s local-neutrality model, since plans in these areas would bid against blended benchmarks only partially reflecting the low local FFS costs. Read the abstract.
