Medicare Beneficiary Out-of-Pocket Costs: Are Medicare Advantage Plans a Better Deal?
By Brian Biles, Lauren Hersch Nicholas and Stuart Guterman
The Commonwealth Fund
May 2006
(Medicare Advantage) plans may be able to provide more benefits than traditional fee-for-service Medicare because the Medicare Modernization Act included provisions that set MA payments greater than per capita fee-for-service costs in every county in the nation. These extra payments to MA plans averaged over 11 percent ($800 per enrollee) in 2005.
The analysis reported here indicates that the benefit packages offered by MA plans often result in substantial out-of-pocket costs for beneficiaries in poor health: in more than 20 percent of the MA plans we examined, located all across the nation in 15 cities in 10 states, enrollees in poor health would have had greater out-of-pocket costs in 2005 than if they had been in traditional fee-for-service Medicare with Medigap Plan F. If not for the extra payments provided to MA plans across-the-board, this pattern could have been even more pronounced.
Even with the completion of the transition to fully risk-adjusted MA payment rates and planned improvements in the risk adjustment methodology, the incentives for plans to avoid enrollees in poor health are unlikely to disappear. Moreover, as increased pressure to control Medicare spending makes continuation of the current level of extra payments to MA plans more difficult to justify, the incentive to shift costs from healthy to sick enrollees will become stronger.
Issue Brief:
http://www.cmwf.org/usr_doc/927_Biles_MedicarebeneOOPcosts_MA_ib.pdf
KFF webcast:
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=1743
Comment:
By Don McCanne, M.D.
The cruelest mechanism of containing health care costs is to increase out-of-pocket spending for those with the greatest health care needs. It is shocking to see that many of the private Medicare Advantage plans, in spite of being granted extra payments by the government, are shifting more of the costs to sick enrollees than they would have to pay in the traditional Medicare with Medigap program, despite the well-documented shortcomings of Medigap coverage. In contrast, the Medicare Advantage programs have lower out-of-pocket costs for their targeted market – healthy Medicare beneficiaries who use few services.
In the KFF webcast on the release of this report, Karen Ignagni, president and CEO of America’s Health Insurance Plans, supported repeal of the lock-in to allow patients the freedom to “vote with their feet” whenever their plans displeased them. Obviously, the greater success the plans have in placing a financial burden on sicker patients, the quicker they would exit thereby relieving the plans of the need to cover them.
Private health plan strategy is, and always has been, to insure the healthy and dump the sick. The private Medicare Advantage plans are no different.
And for this the taxpayers are rewarding them with extra payments?! Enough!!