Setting Medicare Advantage payment levels on par with traditional fee-for-service Medicare would save the federal government $54 billion from 2009 to 2012, and $149 billion from 2009 to 2017, according to a new report by the Congressional Budget Office. For private fee-for-service plans alone, federal spending could be reduced by roughly $14 billion from 2009 to 2012 and $43 billion from 2009 to 2017 if benchmarks were set to 100% of fee-for-service costs, the CBO said.
On average, Medicare Advantage plans are paid about 12% more per beneficiary than traditional Medicare. But that number is higher when it comes to private fee-for-service plans. On average, private fee-for-service plans are paid 19% above fee-for-service plans.
Still, as enticing as those savings might look to lawmakers struggling to find money for other healthcare priorities, the report came with a catch. Any reduction in pay, it found, would diminish the additional benefits and cash rebates that Medicare Advantage plans can offer to enrollees.
The CBO estimated that by setting Medicare Advantage payment levels to fee-for-service levels, enrollment in Medicare Advantage would decline by about 50% in the next five years, to about 6.2 million. Currently, the CBO estimates there are about 8 million enrollees, or about 18% of the 43 million beneficiaries enrolled in Medicare, with Medicare Advantage enrollment expected to reach 12.5 million in 2012. -- by Matthew DoBias