The health insurance industry often attributes lower spending among Medicare Advantage seniors compared with those in traditional Medicare to care-management strategies. But a study published Monday turns that claim on its head.
Researchers at the Kaiser Family Foundation found that traditional Medicare beneficiaries who opt to enroll in a Medicare Advantage plan offered by a private health insurer have lower average spending and use fewer services—before they ever switch to Medicare Advantage—than their counterparts who stay in traditional Medicare. The findings raise questions about how much Advantage plans actually lower spending.
Moreover, the results suggest that the CMS, which uses traditional Medicare spending to calculate Advantage payments, overpays Medicare Advantage plans to the tune of billions of dollars each year, the researchers concluded. A little more than a third of Medicare's 60 million enrollees are in an Advantage plan. The CMS paid Medicare Advantage insurers about $233 billion in 2018, a figure expected to grow as more seniors choose Advantage plans.
"Medicare Advantage plans are perhaps getting paid more than the actual expected costs of their enrollees," said Gretchen Jacobson, a Kaiser Family Foundation associate director who co-authored the study.
Researchers looked at average Medicare Part A and B spending among people who were enrolled in traditional Medicare in 2015. Those enrollees who switched to a Medicare Advantage plan in 2016 spent $1,253 less in 2015 on average than beneficiaries who did not switch, after controlling for health risks.