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Medicare Advantage Scourge Sees $830B in Program Fat

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What You Need to Know

  • The Committee for a Responsible Federal Budeget has long argued that Medicare is unsustainable.
  • The committee says Medicare managers should get Medicare Advantage issuers to compete harder based on price.
  • Committee critics say the committee ignores the value the Medicare Advantage plans generate.

`A group that’s been tough on Medicare since 1981 says Congress could cut as much as $830 billion in Medicare Advantage spending over 10 years.

The Committee for a Responsible Federal Budget included four budget ideas that might generate those savings in an analysis of the options Congress might have to pay for new benefits programs:

  • Adjusting Medicare Advantage payments to reflect the idea that doctors and hospitals might be trying to make patients look sicker then they are: ($45 billion to $355 billion in projected saving)
  • Realigning the current program bidding process to make issuers compete harder based on price: (55 billion to $230 billion.)
  • Adjusting Medicare Advantage risk adjustment payments: ($50 billion to 80 billion)
  • Cutting excess Medicare Advantage plan quality bonus payments: ($30 billion to $165 billion)

The Medicare Advantage program gives private carriers a chance to sell plans that serve as an alternative to traditional Medicare coverage.

The program is now spending about $750 billion per year. About half of the cash comes from enrollee premiums and half comes from cash the Medicare program provides. The Medicare program payments are based on the amounts Medicare program managers think they might have spent on the enrollees if the enrollees were using traditional Medicare Part A hospitalization benefits and Medicare Part B outpatient and physician services benefits.

Congress now is debating a $1 trillion infrastructure bill and a $3.5 trillion social welfare programs bill.

One question is how Congress will come up with the tax increases and spending cuts needed to pay for the social welfare program proposals, such as provisions that could add dental, vision and hearing coverage of the traditional Medicare program.

The federal budget committee committee says Congress could get a large fraction of the spending cuts by pruning Medicare Advantage program costs.

The committee has drawn fire in the past.

In 2013, the Nation alleged that the committee had significant backing from the Peter G. Peterson Foundation, which, in turn, supported the idea that the country must slash spending on Medicare and Medicaid to balance the federal budget. Critics said that, in the past, the committee had support from tobacco companies and was too soft on tobacco companies.

America’s Health Insurance Plans, the Better Medicare Alliance, individual insurers and some patient advocacy groups say Medicare Advantage critics give too little weight to the value Medicare Advantage plans provide by filling in most of the holes in the traditional Medicare coverage, such as complicated co-payment and coinsurance requirements, and adding benefits such as dental benefits, vision care benefits and wellness benefits.

The committee contends that a tough approach to budgeting is necessary to keep Medicare solvent.

What It Means

Medicare Advantage plan issuers have weathered many similar kinds of attacks in the past, but the new battle may lead to new rounds of television, print and digital ads promoting the program, and more pleas for agents, brokers and patients to defend it.

For producers in the Medicare supplement insurance market, the controversy could tilt the market back a little more in favor of clients signing up for traditional Medicare and Medicare supplement insurance policies.

(Image: Adobe Stock)