Evidence continues to pile up that Medicare Advantage plans are no advantage for taxpayers. MA plans, as they are called, are one alternative for seniors to receive their Medicare benefits. But in this case, the benefits come from government payments to private insurance carriers, not directly from the federal government.
Medicare Advantage plans took off in 2006 when overpayments from the government allowed insurance sellers to offer these arrangements as an alternative to traditional Medicare benefits and Medigap policies. In a move to encourage beneficiaries to use managed care — on the theory it would save money — the government began to pay insurers to provide the same benefits to seniors and disabled people eligible for Medicare that would be available in the regular fee-for-service program.
Payments from Washington have been very generous — a kind of subsidy for insurers that has made it possible for them to entice seniors with low or no monthly premiums for their coverage and extra goodies like chiropractic care, gym memberships and eyeglasses.
There was a catch, though, that seniors would learn about only if they got sick. Some of these no-premium MA plans came with high copayments and coinsurance required for many services. Still, they’ve become so popular that 30 percent of all Medicare beneficiaries now have them, and most beneficiaries eagerly sign up for them during fall open enrollment with little thought to potentially high out-of-pocket costs down the road.
Studies by health policy researchers in and out of government have found that Medicare has paid insurance companies as much as 12 or 13 percent more than it costs to provide identical benefits for the same services under the traditional program thanks to quirks in the payment formulas as well as overbilling by insurance companies.
The most recent study has come from Medicare’s own researchers who quietly posted their results in late July on an online research site of the Centers for Medicare and Medicaid Services, which runs the Medicare program. They found many MA plans routinely overbill the government for treating elderly patients and have done so for years.
Researchers said that many MA plans exaggerate how sick their patients are and how much they cost to treat them, a practice called upcoding, which my journalistic colleague Fred Schulte at the Center for Public Integrity has written about extensively. Schulte told me, “The study can appear to be an inside baseball thing, but it’s hugely important since it exposes tons and tons of misspent taxpayer money.”
For example, CMS researchers found that beneficiaries in some MA plans appeared to have rates of some diseases like depression and complications from diabetes that were higher than those in traditional Medicare. Yet they concluded that people who join MA plans are healthier than those who stay in traditional Medicare. They concluded it’s “unlikely” that the higher payments insurers receive for these more complicated conditions are related to improvements to seniors’ health provided by the plans, as the insurance industry claims.
The fact the study has gotten so little attention is puzzling considering that the MA program will cost the government some $160 billion this year. But, then maybe it’s not so puzzling given what’s happened to past efforts to reduce excess payments to the plans.
President Barack Obama came to the White House vowing to cut the overpayments, a promise he made often on the campaign stump. But each time CMS proposed cuts, the insurance industry’s lobbying, its slick advertising and TV campaigns, and ultimately pressure from members of Congress, both Democrats and Republicans, turned the proposed cuts into payment increases. Medicare Advantage is good business for the carriers. Last year, a journalist for the now-defunct Medicare News Group estimated no cuts would add some $11 billion to insurers’ bottom lines.
In 2013, the agency proposed a 2.2 percent cut that turned into a 3 percent rate hike. Same story this year. A proposed 2 percent rate reduction resulted in a small increase in payments. And, in 2012, CMS decided to forgive more than $32 billion in overpayments the government had given the insurers from 2008 through 2010.
Schulte thinks the recent study may be the program’s “Achilles heel.” I’m not so optimistic. CMS has not released the names of the insurance companies doing the most overcharging. If the agency would spotlight individual companies, then we consumers would have a chance to see what’s really happening. Maybe that would finally effect change.
Editor's note: The Rural Health News Service is funded by a grant from The Commonwealth Fund and distributed through the Nebraska Press Association Foundation, the Colorado Press Association, the South Dakota Newspaper Association and the Hoosier (IN) State Press Association.