Medicare Advantage

Brief introduction to Overpayments to Medicare Advantage Plans . . .

Ending Overpayment in Medicare Advantage – Center for American Progress

Through the Medicare Advantage (MA) program, private insurers are expected to save money by reducing waste, avoiding overuse, and providing more coordinated care than is available through traditional Medicare. Research finds MA plans are significantly overpaid relative to the traditional Medicare program—without delivering a higher-quality product.

In 2023, a record high or slightly more than half of eligible Medicare beneficiaries were enrolled in MA plans. MA overpayments to insurers are a key driver of increasing MA enrollment. The higher payments are the result of selection bias of enrollees and risk coding. It is not unusual for enrollees to switch to Traditional Medicare.

Overpayments benefit the MA plans rather than their enrollees. MA plans receive a fixed payment for each member, regardless of services delivered. The fixed payments give MA plans a financial incentive to restrict care once people are enrolled. This famously results in service delays or denials. MA enrollees may also face inadequate provider networks, which limits access to timely, needed care and imposes burdensome travel. Meanwhile, misleading marketing exaggerates MA plans’ benefits and obscures their limitations, enticing some Medicare beneficiaries to enroll in disadvantageous MA plans.

High payment levels attract insurers to the MA market and enable the funding of supplemental benefits that, in turn, attract beneficiaries. These high payments also enable MA plans to finance advertising campaigns to further build their market share. The combination of rapid growth in MA enrollment and overpayment to MA plans poses a serious threat to the financial sustainability of the Medicare Hospital Insurance Trust Fund.

Ending Overpayment in Medicare Advantage – Center for American Progress – Graph

Overpayment to MA is more than just a fiscal problem; it undermines the goals of the Medicare program itself. The goals of the Medicare program should be to guarantee simple and comprehensive coverage, ensure affordable out-of-pocket costs, modernize prescription drug coverage, strengthen primary care, and promote population health and health equity (CAP). The result being the inflated MA payments increase Part B premiums for beneficiaries across Medicare. It contributes to greater fragmentation and complexity in health care coverage and delivery systems. It also diverts attention and resources to medical coding tactics rather than improving clinical care and population health. It also may exacerbate at least some health disparities.

The results of MA overpayments? Threats to the long-term viability of traditional Medicare. Care for millions of Americans as Medicare provides a lifeline to tens of millions of Americans depending on this program for the rest of their lives. The broad access to providers by traditional Medicare is helpful for people with complex chronic conditions. Traditional Medicare program could further important policy goals, such as lowering Medicare’s administrative costs, providing more resources for clinical care, and offering coverage with public accountability to protect against harmful restrictions on care. The over-payment of MA consumes billions of public dollars. Funds which could be diverted and spent improving benefits and lowering costs for all Medicare beneficiaries.

“March 2024 Report to the Congress: Medicare Payment Policy,” MedPAC

“Donald Berwick, M.D. Writes Forcefully on the Issue of Waste in the U.S. Healthcare System,” Healthcare Innovation