2022 Overpayment to Medicare Advantage? Somewhere between 22% and 35%
Maybe $88 billion and $140 billion will get your attention? Congress does not blink an eye at this expenditure.
Received an email from PNHP’s Kip Sullivan who is knowledgeable on Single Payer and Medicare Advantage healthcare plans. Whenever he writes an article, he sends me an email so Angry Bear can be first in line to place it on the blogosphere. Computer was down and I am a couple of days late in posting his commentary.
If you are unaware of what Medicare Advantage (misnomer) is about, this article by Kip will give you a brief explanation.
Medicare Advantage is a money grab by big insurers, Minnesota Reformer, Kip Sullivan (PNHP)
The Sunday, Oct. 15 issue of the Minneapolis Star Tribune arrived on my doorstep wrapped in a four-page advertisement for something called Allina Health-Aetna. Allina is a 12-hospital multi-clinic chain; Aetna, which was bought out by the drug chain CVS for $69 billion five years ago, is a health insurance company.
The purpose of the ad was to urge the 20% of Minnesotans who are eligible for Medicare — the nation’s health insurance program for the elderly and the disabled — to enroll in Allina-Aetna’s “Medicare Advantage” plan.
“Medicare Advantage” is the misleading name given to the privatized portion of Medicare — the portion in which tax dollars are funneled through insurance companies so they can take 15% off the top to pay for administrative costs and profit before sending the other 85% to doctors and hospitals with strings attached. The traditional Medicare program — the unprivatized portion – does not funnel money through insurance companies; it pays doctors and hospitals directly, and it devotes around 2% of its expenditures to administrative costs. Today half of all Medicare beneficiaries are insured by insurance companies and the other half are insured by traditional Medicare.
Allina-Aetna’s ad boasted about extra services their “advantage” plan covers that Congress has never allowed the traditional Medicare program to cover. The upper half of the first page of the ad was taken up with these words: “Can I get dental, vision and hearing benefits in a Medicare plan?” Just below the fold were the words,
“Yes, yes, and yes!”
What the ad didn’t explain was how health insurance companies not only survive within Medicare but make big profits. After all, Congress enacted Medicare in 1965 because the health insurance industry didn’t want to insure the elderly and the disabled. How is it that today insurance companies offer extra services and still make an outlandish profit despite their high administrative costs? American health insurance companies make 2.5 times as much profit per enrollee on Medicare as they do on their private-sector customers, according to a 2021 KFF paper on health insurer financial performance.
The answer: They are vastly overpaid. According to a report released earlier this month by Physicians for a National Health Program (PNHP), which I helped write, the overpayment in 2022 was somewhere between 22% and 35%. In other words, the cost of insuring Medicare beneficiaries through Medicare Advantage was 22% to 35% higher, or somewhere between $88 billion and $140 billion more, than it would have been had those beneficiaries remained in traditional Medicare. Those are astronomical figures. That’s far more, for example, than the $75 billion the U.S. spent on humanitarian and military aid for Ukraine between February 2022 and October 2023.
The PNHP report documented five causes of these overpayments:
- “Favorable selection,” which means insurance companies lure healthier-than-average beneficiaries away from traditional Medicare, but Medicare pays them as if they enrolled beneficiaries in average health (overpayment of 11% to 14%);
- “upcoding,” the name given to the insurance companies’ practice of making their enrollees look sicker (and therefore warranting higher reimbursement) by adding diagnoses to patient medical records that are either false or irrelevant to the treatment given to the patient (5%);
- pointless bonuses Congress requires Medicare to give to Medicare Advantage plans for high scores on a score card that is so inaccurate the Medicare Payment Advisory Commission has called for its termination (4%);
- gratuitous bonuses Congress ordered Medicare to give to plans that sell insurance in more rural parts of the country that plans tend to avoid (2% to 3%);
- and, a subsidy created by Medicare’s use of the average cost of insuring a traditional Medicare beneficiary as the baseline to determine plans’ payments, uncorrected for the portion of traditional Medicare costs paid for by supplemental (Medigap) coverage (9%).
PNHP’s estimate of the total overpayment does not take into account “favorable deselection” — driving sicker Medicare Advantage enrollees back to traditional Medicare by denying them necessary services. We have abundant evidence indicating Medicare Advantage plans deny necessary services to tens of thousands of their enrollees every year. But we don’t have any research on how much that adds to the overpayments. This abuse of enrollees is just one of the reasons research indicates Medicare Advantage plans have had at best, a mixed effect on quality.
The Allina-Aetna four-page ad that now sits in my recycling bin made no mention of the overpayments, nor of the reasons why Medicare beneficiaries should consider avoiding enrolling in a Medicare Advantage plan (narrow networks and frequent denial of services being the most important).
Congress should put an immediate stop to the overpayments and, at the same time, authorize traditional Medicare to cover dental, vision and hearing services.
Our Payments Their Profits, MA Overpayment Report (pnhp.org)
Page two: ” Either of these – or other crucial aspects of Medicare and Medicaid – could be funded entirely by eliminating overcharges in the Medicare Advantage program.
Great article. Can I get your permission to pretty much copy this information and delivering it to my Congressman? Regards, Garry
Garry:
I forgot to add the title of Kip Sullivan’s article. It is there now. I have also added the title and the link to the PNHP report at the bottom of the report. A plug for where you read this would be kind of nice! Garry, you are free to copy and paste this and send this off to your Congressional Representative. I have no problem with this and defending Kip’s article.
Most import is to attribute Kip Sullivan and PNHP.
Thank you.
Bill
Thank you for asking.
Of course I’ll attribute and thanks for the excellent article and information sir.
Garry:
Kip Sullivan is the author. Whenever he writes, he let me know. Kip is the one to acknowledge as the author.
The right-wing/libertarian bleat is that private enterprise is always and everywhere more efficient than government. Well, it’s certainly more efficient at extracting money.
Is the overpayment on traditional Medicare coverage items or include those dental, vision etc. add-ons? I am also a bit confused as I have only traditional Medicare and it has been accepted for audiology and vision claims. Medicare seems to have some coverage of those. Dental, so far, no, but my oral health situation has nothing beyond cleanings (so far). I have to admit that the Medicare Advantage ads that I see seem so nuts plus tend to feature quite elderly and often befuddled beneficiaries that my gut just says to stay out of it without any comprehensive review of the plans.
Eric:
It depends on how the doctor defines your needs. I had eye surgery recently and received three shots in the right eye (ugh!) which Medicare paid for. Eye glasses, no. Certain aspects of Dental yes. Congress will not allow Medicare to cover more. You can go anywhere with Medicare in the US but are limited out of country. The Advantage programs may lock you in to certain providers in your area.
@Bill,
From what I’ve read, the denial of coverage rates are higher with Medicare “Advantage” than with traditional Medicare.
Joel:
That is correct. Medicare Advantage plans are more apt to over code also. We have to remember the plans submitted their patients diagnosis plans for 2023 in 2022. They are prepaid. So a denial of claim may still result in a payment and no care.
Eye exam but no new glasses. I have Meniere’s, but the only on-going issue is hearing loss. Maybe that’s why Medicare covered. No new hearing aids.
It’s a rather simple identity. Every penny of profit received by Medicare Advantage programs is pure and simple government waste.
Yes . . . It is a swindle by healthcare insurance companies.