Privatization of Medicare plans was billed as a way to save the program money. But according to a Commonwealth Fund study, the private plans cost an additional $5.2 billion in extra payments. In 2005, private Medicare Advantage plans were paid an average of 12.4 percent more per enrollee than the same enrollee would have cost the traditional Medicare program, according to “The Cost of Privatization: Extra Payment to Medicare Advantage Plans – Updated and Revised.”
The bulk of the extra payments, roughly $922 per individual for almost 5.6 million beneficiaries, was mandated by the Medicare Modernization Act of 2003 to encourage privatization.
“Medicare should carefully examine whether extra payments to Medicare Advantage plans are the best use of dollars for the beneficiaries the program is designed to serve,” said Karen Davis, Commonwealth Fund president.