Understanding Medicare Advantage payment: how the program allows and obscures overspending

Understanding Medicare Advantage payment: how the program allows and obscures overspending

Collection:
Health Policy and Services Research
Author(s):
Berenson, Robert A., author
Garrett, Bowen, author
Shartzer, Adele, author
Contributor(s):
Health Policy Center (Urban Institute), issuing body.
Urban Institute, issuing body.
Publication:
Washington, DC : Urban Institute, September 2022
Language(s):
English
Format:
Text
Subject(s):
Health Policy
Medicare Part A -- economics
Medicare Part C -- economics
United States
Genre(s):
Technical Report
Abstract:
Enrollment in Medicare Advantage (MA) will soon be larger than enrollment in traditional Medicare (TM). Rapid enrollment growth demonstrates the popularity of MA among Medicare beneficiaries. MA is also profitable for insurers and has widespread bipartisan political support. MA plans have reduced health care utilization, but although MA was also supposed to generate Medicare program savings, it never has. Policy groups such as the Medicare Payment Advisory Commission (MedPAC) have long understood and explained that MA plans are overpaid relative to TM when viewed on comparable terms. Meanwhile, the Hospital Insurance trust fund that finances Part A of TM (hospital services) is estimated to be exhausted in 2028, leaving Part A insolvent with enough dedicated financing to pay only 90 cents on the dollar for promised services (Medicare Trustees 2022). The way Medicare pays MA plans is complicated and difficult to describe in simple terms, which can hinder reform efforts. In this brief, we describe the three major components of the MA payment system (bidding benchmarks, quality bonuses, and risk adjustment), how they contribute to overpayment to MA plans, and why the magnitude of overpayment is difficult to directly observe. We also describe reform proposals that would improve MA and generate program savings that could help shore up Medicare's financing or reduce federal budget deficits.
Copyright:
Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-DC license. (More information)
Extent:
1 online resource (1 PDF file (21 pages))
NLM Unique ID:
9918503478506676 (See catalog record)
Permanent Link:
http://resource.nlm.nih.gov/9918503478506676