Medicare Advantage’s Cost to Taxpayers

Medicare Advantage often plans upcode severe medical conditions for thousands of dollars more than traditional Medicare, and CMS does not monitor this practice. Some of the most common upcodes include diabetes with complications, major depression, and congestive heart failure. In 2005, Congress recognized the problem and directed CMS to set an annual coding intensity adjustment for Medicare Advantage plans, Medicare Advantage’s Cost to Taxpayers.

Overpayments to Medicare Advantage plans

Overpayments to Medicare Advantage plans have been a problem for years, but a new study shows that these payments are a growing drain on taxpayers. The Center for Medicare Studies estimates that Medicare Advantage plans cost the government almost $70 billion between fiscal years 2008 and 2013 alone. The overpayments are often caused by mistakes in risk scores, which are essential to Medicare beneficiaries, but also have costs to taxpayers. The study also found that overpayments to Medicare Advantage plans are far more significant than those made to standard Medicare.

The problem stems partly from MA plans’ incentives to report enrollee diagnoses more accurately. This means that MA plans receive higher payments for diagnosing and treating more severe conditions than their FFS counterparts. Unfortunately, this means that the Centers for Medicare and Medicaid Services have to adjust payments to account for the difference in diagnoses. These are “coding intensity adjustments,” and they can be challenging to implement.

Medicare trustees have also said that the trust fund for Part A will be running out of money by 2026. This is because the funds for Part A are financed by payroll taxes paid by both employers and employees. Medicare Advantage plans, however, will not lobby for an increase in the payroll tax, even if it means paying more for the same coverage.

Overpayments to PFFS plans

A large portion of Medicare Advantage’s cost to taxpayers is due to overpayments to PFFS plans, which are the fastest growing part of the program. According to a recent Commonwealth Fund report, private fee-for-service plans accounted for 16.6 percent of all Medicare Advantage overpayments in 2008. That equates to over $2.5 billion in extra spending in 2008.

The Obama Administration has taken steps to reduce PFFS’s growth, but the plans are still increasing. As a result, these plans’ enrollment increased from approximately 220,000 in December 2005 to nearly two million in February 2008. The Medicare Improvements for Patients and Providers Act of 2008, passed by Congress in 2010, limits the growth of PFFS plans. The law also mandates specific plans to offer provider networks beginning in 2011.

The increased costs were passed on to beneficiaries through higher benefits. By November 2009, the number of people enrolled in MA managed care plans reached 10.9 million, representing one out of four Medicare beneficiaries. This is an increase of over one million from November 2008. Enrollees increased by more than two million from 2003 to 2009. However, enrollment in MA increased less in rural areas than in urban areas.

AHIP and the Commonwealth Fund have opposed the legislation to reduce Medicare Advantage’s cost to taxpayers. They claim that overpayments do not represent the primary problem. Furthermore, they say PFFS plans are better for Medicare because they provide additional benefits and lower out-of-pocket expenses.

Influence on practice patterns of traditional Medicare

The study examined the influence of Medicare Advantage on the practice patterns of traditional Medicare beneficiaries. Medicare Advantage enrollees reported better overall health and mental health than their traditional Medicare counterparts. However, differences in utilization levels were not statistically significant. Nonetheless, Medicare Advantage enrollees had a lower overall utilization rate. The study also found that the use of emergency room services was lower in Medicare Advantage compared to traditional Medicare.

The CMS and private payers have implemented several payment models that reward high-quality care. These include accountable care organizations, bundled payments, and comprehensive primary care initiatives. Most of these new payment models are tied to quality or performance measures and promote provider collaboration. These payment models have been widely implemented in traditional Medicare.

However, the costs of care delivery in MA plans are lower than in traditional Medicare. Despite this, there are still disparities between the two programs. The Medicare Shared Savings Program and Medicare Advantage aim to improve patient outcomes. However, they do not have similar clinical risk profiles and differ in their costs.

The study used data from two extensive surveys, which included data on Medicare Advantage enrollments in traditional Medicare. The sample sizes for these surveys were between 66,813 and 131,104 beneficiaries. While these data are not publicly available, they are believed to help forecast future utilization patterns.