Large payment increases to private health plans in the new Medicare Advantage program may not be being put to best use, the Commonwealth Fund said. One study by the not-for-profit group found that Medicare Advantage plans used half of their average 10.9% payment increase in 2004 to improve benefits and reduce premiums and 42% to boost payments to providers. But according to the study, enrollees in poor health did not benefit from reductions in out-of-pocket costs as much as enrollees in good health. "We should be concerned about whether these extra payments to private plans are the best use of federal budget resources to improve affordability and access to services for all Medicare beneficiaries, particularly those with the greatest healthcare needs," Commonwealth Fund President Karen Davis said in a news release.
A second Commonwealth Fund study found that Medicare Advantage plans will receive an average of 7.8%, or $546, more per enrollee next year than the average cost per enrollee in traditional Medicare -- a total of $2.72 billion in extra payments. However, $2.72 billion also would be enough to reduce the 2005 increase in Part B premiums by 46% to $6.30 per month from $11.60 per month for every Medicare beneficiary. Medicare Advantage was established in 2003 to replace the Medicare+Choice program and targeted for substantial payment increases over three years to encourage more insurers to participate. Some 5 million, or 12.7%, of Medicare's 42 million beneficiaries are enrolled in Medicare Advantage. Read the fund's issue briefs on 2004 payments and 2005 payments. -- by Laura B. Benko