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Extra Medicare money helps TV stations

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Three economists say increasing federal spending on the Medicare Advantage program may do little to help the plan enrollees.

Mark Duggan, Amanda Starc and Boris Vabson, economists at the University of Pennsylvania, make that argument in an informal “working paper” published on the website of the National Bureau of Economic Research.

A working paper has not yet gone through a formal academic journal peer review process.

Duggan and his colleagues studied the effects of government funding on Medicare Advantage program stakeholders by comparing how the program operates in markets with populations of more or less than 250,000.

The program gives private insurers a chance to offer plans that serve as substitutes for traditional Medicare program coverage. The government pays a substantially higher reimbursement rate in urban areas than in nearby non-urban areas. 

The economists correlated program funding with quality measures and other consumer value measures, such as out-of-pocket cost amounts.

Quality measures had no apparent correlation with the government funding levels, and premium levels had little correlation, the economists report.

Urban plan enrollees faced somewhat lower out-of-pocket costs, but the average difference was small, and it looks as if insurers were using less than 20 percent of the extra program funding to lower enrollees’ out-of-pocket costs, the economists say.

The economists estimate that 22 percent of extra Medicare Advantage spending goes to insurers.

Much of the rest of the extra spending seems to go to TV stations and other media companies, in the form of extra health insurer spending on advertising, the economists say.

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