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Prognosis


MEDICARE WATCHDOG WARNS OF $12 BILLION IN EXCESS PAYMENTS

 * Advisory panel says payments to private plans need overhaul
 * Medicare Advantage fuels growth at health insurers, startups

By

John Tozzi

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March 15, 2022, 5:00 PM GMT


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Medicare Advantage is leading the U.S. government to spend billions more on
seniors’ medical care than it should and needs a significant makeover, a
nonpartisan watchdog said in a report to lawmakers.

The program collected $12 billion in “excess payments” in 2020 over what the
U.S. would have paid to cover people who used the private plans under standard
Medicare, according to a report by the Medicare Payment Advisory Commission, or
MedPAC, released Tuesday. 




Medicare has offered some private-sector version since the 1980s, and the
current program, called Medicare Advantage, is nearly two decades old. It allows
insurers to sell plans that provide Medicare benefits along with add-ons like
dental or vision coverage. That can eliminate the need for consumers to purchase
supplemental insurance that picks up costs not covered by Medicare itself.



However, MedPAC said swelling costs could threaten the sustainability of
Medicare and a major overhaul of the popular program is urgently needed. The
program paid Medicare Advantage plans $350 billion last year, MedPAC said.

Enrollment in Medicare Advantage plans has doubled over the past decade to cover
nearly half of Medicare’s 64 million beneficiaries, fetching billions for large
insurers including UnitedHealth Group Inc., Humana Inc. and CVS Health Corp.’s
Aetna unit that have bet heavily on the business.



Read more: Why investors are pouring money into medicine’s worst-paying
specialty.

It has also given rise to an ecosystem of smaller companies eager to cash in,
such as tech-focused insurers like Clover Health Investments Corp. and Alignment
Healthcare Inc., and clinics that cater to seniors on the plans, including Oak
Street Health Inc. and Cano Health Inc. 

Many of those companies have seen their shares suffer recently due in part to
concerns that it will be more difficult to make profits from the business than
investors had once expected. 


APPROPRIATE PRESSURE

MedPAC, established in the 1990s to advise lawmakers on Medicare policy, has
long warned about excess Medicare Advantage payments. Private plans are on pace
to cover half of all Medicare beneficiaries next year, according to the latest
report, and MedPAC said they should be pushed to pare costs.




Medicare Advantage plans “need to face appropriate financial pressure” in line
with providers in the traditional fee-for-service Medicare program, the group
said.



According to the report, excess payments are driven by plans getting paid more
money by the government for taking care of sicker members. Each month, Medicare
Advantage plans receive U.S. funds based on the health of their enrollees. For
years, MedPAC and other authorities have claimed that insurers manipulate the
system to pump up their revenue.

Read more: How Medicare Advantage plans code illnesses for maximum payout.



“These policy flaws diminish the integrity of the program and generate waste
from beneficiary premiums and taxpayer funds,” MedPAC wrote. The commission said
it supports having private plans as an option for Medicare members, but said
they have never saved Medicare money.


INDUSTRY BACKLASH

Trade groups such as America’s Health Insurance Plans and the Better Medicare
Alliance have disputed MedPAC’s criticism in the past. They say that the program
provides better care than traditional Medicare.


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Insurers say Medicare Advantage can eliminate the need to buy additional
coverage to paper over gaps in the traditional program, and provide other
important benefits like meal delivery or transportation. The plans can also cap
out-of-pocket costs, which can be unlimited in Medicare without extra coverage.

Payments to Medicare Advantage plans for extra benefits have increased by 53%
since 2019, MedPAC said, “yet we have no data about their use nor information
about their value.”

The commission acknowledged that Medicare Advantage plans can deliver lower-cost
care. Yet the savings don’t accrue to taxpayers or others in the program, the
commission wrote. 



“These efficiencies are shared exclusively by the companies sponsoring MA plans
and MA enrollees, in the form of extra benefits,” the report said.





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