Extra payments to private Medicare Advantage (MA) plans have been estimated to amount to $986 over fee-for-service costs for each of about 8.7 million Medicare beneficiaries enrolled in MA plans, for a total of more than $8.5 billion in 2008, according to a new report from The Commonwealth Fund, The Continuing Cost of Privatization: Extra Payments to Medicare Advantage Plans in 2008. Even if the payment reductions to MA plans mandated by the Medicare Improvements for Patients and Providers Act of 2008--scheduled to take effect beginning in 2010--had been fully in place in 2008, MA plans still would have been paid 10.6 percent more than expected fee-for-service costs.
“Medicare Advantage was intended to save the program money through the use of private plans. However, extra payments to these plans, combined with rapidly increasing enrollment, have resulted in $33 billion in additional spending over the past five years,” write the authors. “These overpayments put pressure on both Medicare and the federal budget, drain resources from other, potentially more productive, uses, and dilute the incentive for Medicare Advantage plan efficiency--which was one of the original reasons for including a private plan option in Medicare.” Access the report.
