Unforeseen Medicare Advantage Costs

When lawmakers included a provision in the Medicare Modernization Act (MMA) of 2003 to expand the role of private health care plans in Medicare, they thought it would reduce Medicare spending growth. They were right about one thing: Medicare Advantage (MA) enrollment has increased from 4.8 million in 2004 to 8.7 million to date. What they didn’t anticipate was MA costs exceeding the standard Medicare Fee-For-Service (MFFS) program.

According to the Common Wealth Fund, MA plans will cost Medicare an average of 12.4 percent or $986 more per person in 2008 than if the person is enrolled in the standard Medicare FFS plan. Multiply that by the number of current enrollees and you get $8.5 billion in extra payments in 2008 — up from $3.9 billion in 2004.

Read the full Sept. 8 report on the Medical News Today Web site.

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6 Responses to “Unforeseen Medicare Advantage Costs”

  1. Susan Proctor says:

    Anyone that is working with this payment model will not be surprised by this finding. You don’t have to be an actuary or a “rocket scientist” to understand that one can not start with a flawed payment model, based on flawed diagnosis data to establish accurately what the cost would be. Then add on the massive effort by the MCO (to their financial benefit) to improve the documentation and coding/reporting of accurate ICD-9-CM for these patients. This just widens the gap between the FFS base line established by CMS and the much more accurate codes reported for HCC. CMS keeps moving the rates and adjusting for these coding improvements, but the flaws in this model going in are too big to be overcome. I think that risk adjustment using the diagnosis code data is a good and necessary move forward within the payment systems, but CMS needs to include credentialed, working, coding professionals in their policy and payment decision making groups to make this work. It’s apparent they either they did not do this or did not listen to any that they might have included.

  2. Kerri Connell, CPC says:

    Whereas the privatization of the Medicare program started with the best intentions, there is no way to incorporate a capitalistic, for profit system into a socialistic system. All that does is increase the financial responsibility of the beneficiaries this was designed to help and increase the burdon on the tax paying individuals. If there was any doubt about the fiscal security of the Medicare program for those of us still working, this should be the eyeopener.

  3. Judy Etzler, CPC says:

    Most Commercial insurance plans are “for profit” insurance companies. They have stock traded over the counter and need to pay dividends to their stock holders. Also, advertising is expensive and CEO’s/administrators have to be well paid. Across the private insurance industry these administrative expenses take up about 25 – 30 percent of the premium payment, Medicare administrative expenses are far less – 3 to 4 percent which means that for Medicare you get more medical care “bang for the buck”. Simple, we need a one insurance payer system like Medicare. Every doctor, clinic, hospital or any other medical entity does business and medical care as they presently do – they are just paid by one payer (this isn’t socialized medicine). More medical care and less expense and everyone has medical insurance. Doctors get paid on time and don’t have to fight or hire employees to keep contacting 200 different insurance companies for payment.

  4. Terry J. Haney, RN, CPC-H says:

    It may not be politically correct to say so, but our Founding Fathers knew what they were doing. The federal government should stay out of anything not clearly indicated in the Constitution for it to do. This is just another example of what happens when the feds take on something best left to individual states or private business. Medicare was a noble idea, but it is (and always will be) unworkable.

  5. Wendy Lacey, RHIT, CCS-P, CPC says:

    It does not surprise me that the advantage plans cost more. The advantage plans that I have been working with (unlike Medicare) do not require a deductible and they pay for an annual physical each year. Since I am working in primary care, the physical is an important element in the patient’s health care and we encourage all of our patients to have one annually. The patient pays a copay at the time of service using the Medicare Advantage plan. If a plan provides more than it must cost more. The other angle of this is that it is tiresome to have to encourage our straight Medicare patients they should have a physical when Medicare does not cover a physical each year and the patient does not want to pay for it. Some patients out right refuse to be scheduled for a physical. What kind of system is this that on one hand is encouraging pay for performance but does not pay for annual physical for for the patients it covers each year?

  6. Candice Williamson, CPC says:

    I am not in the least bit surprised. I blame inadequate oversight by our government. If money couldn’t be made, and LOT’S of it, few insurance companies would have had interest in getting involved with the Medicare Managed Care Plans.

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