Medicare Advantage
Kaiser Family Foundation
February 2007
Most of the 43 million elderly and disabled people on Medicare (81%) have their health bills paid by the traditional fee-for-service program; 19% (8.3 million) receive their Medicare benefits through private health plans that receive payments from Medicare, now generally known as “Medicare Advantage” plans.
Private fee-for-service plans (PFFS) differ from Medicare HMOs and PPOs in that they are not required to establish provider networks or to adopt utilization management strategies, and do not coordinate care like most other Medicare Advantage plans.
In 2006, Medicare began to pay plans under a bidding process. Plans bid against county level benchmarks established by CMS based on the prior year’s MA county payment rate, increased by the projected national growth rate in per capita Medicare spending.
Many plans have expanded services to rural and other areas with benchmarks that are high relative to Medicare FFS spending because these areas were given increases in payment rates under earlier law.
MedPAC analysis based on July 2006 enrollment data shows that Medicare payments to private health plans on behalf of enrollees average 112% of FFS costs for the counties where MA enrollees reside. PFFS plans–prevalent in rural areas where the benchmark rate is significantly higher than Medicare FFS costs–are paid 119% of FFS costs before adjusting for enrollee risk.
http://www.kff.org/medicare/upload/2052-09.pdf
Comment:
By Don McCanne, MD
Of the various Medicare Advantage plans, the private fee-for-service plans most closely resemble the traditional fee-for-service Medicare program. Just as with the traditional Medicare program, the patient can receive care on a fee-for-service basis from any physician willing to accept payment from the plan.
If the private fee-for-service plans work like the traditional Medicare program, then why is the government paying them 119 percent of the costs of the traditional program? That’s much more than the other Medicare Advantage plans receive. Weren’t the private sector plans authorized because they would be much more efficient than the traditional Medicare program run by a government bureaucracy? Aren’t they supposed to be saving the taxpayers money?
Medicare regulations do require that a small portion of the excess payments be used to increase benefits, and so these plans may also offer prescription drug coverage or extra days in the hospital, or a reduction in premiums paid. (They do not need to use very much of the 19 percent overpayment, but only 75 percent of the amount by which the plan’s bid is below the benchmark for the region.)
Why should private plans be paid so much more for duplicating what our more efficient traditional Medicare program is already doing?
Why should patients in the traditional Medicare program be deprived of benefits, such as drug coverage, that are made possible by this deliberate overpayment to the private plans?
Why do our legislators tell us that there isn’t enough money to improve benefits in the traditional program, when they can find plenty of money to reward these plans so generously?
Why do we even have to ask these questions?
