|Medicare Advantage Plans Increases Medicare Costs, Studies Report
Although Medicare Advantage’s (MA) private health
plans have given beneficiaries more alternative ways to receive
Medicare benefits, they have also created more complexity, generated
negligible gains in quality and added to the costs of the Medicare
program, researchers report in two studies.
By mid-2008, slightly more than 10 million Medicare
beneficiaries, or 23 percent of the Medicare pool, were enrolled in the
MA program or a similar private plan. That is nearly double the
enrollment in private plans in 2003, when 5.3 million beneficiaries
were enrolled. If expansion of enrollment in private plans was an
important goal of Medicare Prescription Drug, Improvement and
Modernization Act (MMA), it clearly has been attained, said Mathematica
Policy Research senior fellow Marsha Gold, the author of one of the
But expansion has come at a cost, as payment to private
plans has contributed to higher Medicare spending. And the higher
payment rates have financed "what is essentially a Medicare benefit
expansion for MA enrollees, without producing any overall savings for
the Medicare program," said Medicare Payment Advisory Commission
(MedPAC) Analysts Carlos Zarabozo and Scott Harrison in another study.
The data show that Medicare pays MA plans 113 percent of
what expenditures would have been underthe traditional Medicare
In her study, Mathematica’s Gold said that the
expansion in plan choice has created more administrative complexity for
the program. In 2008, the Centers for Medicare and Medicaid Services
(CMS) had to review, approve and oversee almost 4,000 MA plans under
more than 700 different MA contracts. "It is difficult to make the case
that Medicare is more administratively efficient because of MMA," said
Gold, adding that having so many plans competing to offer essentially
the same product adds to costs and beneficiary confusion, with the
average beneficiary asked to choose among 44 different MA plans.
Zarabozo and Harrison report that current policy has
favored growth of certain types of plans. Plans are paid significantly
more than they would have been under traditional Medicare, and while
some of these payments are used to finance extra benefits for
enrollees, the authors said that paying plans at this rate could affect
the sustainability of Medicare and result in increased costs for
taxpayers as well as beneficiaries.
The fastest-growing type of MA plans has been the
private fee-for-service (PFFS) plans, which allow beneficiaries to see
any provider who will accept the plan’s payment rates. These
plans made up 48 percent of the total increase in MA enrollment after
MMA’s enactment in 2003. In 2006, 11 firms offered a PFFS plan;
by 2008, almost 50 did.
Since these kinds of plans dominate MA’s growth
and were deliberately structured to minimize effects on care delivery,
Gold said that "quality is unlikely to be better and could be worse if
provider acceptance creates access problems." In addition,
"PFFS’s advantages also seem to have made it harder for health
maintenance organizations, the most tightly managed plan, to expand,"
she said. Special needs plans account for 24 percent of the growth in
MA enrollment. Although these plans could improve care delivery for
these vulnerable beneficiaries, Gold said that evidence to date
suggests that only a minority of SNPs are being structured to achieve
"We spend a lot of money for the Medicare Advantage
program, and it’s not clear what we get in return," Gold said.
Although plan choice has increased, mainly in rural areas, many
beneficiaries still have few local coordinated care plans (CCPs)
available. Enrollment in CCPs appears to be growing slowly. This
creates an environment that "does not favor care coordination and
quality enhancement," added Gold.
More government oversight and accountability in the MA
program are needed, she argues. Gold said that the federal government
should set goals for the program and create a way to measure its
success. This might include an annual report from the CMS to Congress
on MA program performance using measures sufficiently detailed,
targeted and consistent across plan types to allow diverse stakeholders
to assess their merits and contribution to Medicare’s overall
The studies were published on the Health Affairs Web site.
Addresses: Mathematic Policy Research Inc., 600 Alexander Park, Princeton, NJ 08540; (609) 799-3535, www.mathematica-mpr.com. Medicare Payment Advisory Commission, 601 New Jersey Ave. NW, Suite 9000, Washington DC 20001; (202) 220-3700, www.pedpac.gov.