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GAO on Medicare Advantage

By April 24, 2012Commentary

The Government Accounting office has released a report on the Medicare Advantage bonus program set up by the Obama Administration.   (GAO Report)   In 2011, about a fourth of all Medicare beneficiaries were enrolled in Medicare Advantage, at a cost of about $115 billion, also around one-fourth of Medicare spending, but the MA beneficiaries generally receive benefits well beyond those provided by fee-for-service Medicare.  The reform act had changed the way CMS reimburses the MA plans, in response to criticism about over-payment and to incent better quality.  But the administration, in its wisdom, ignored the law and set up a national “demonstration” which provided more and higher bonuses for plans with better stars ratings, or better quality on the measures in the stars program.  Some say that the Administration was just trying to avoid beneficiary revolt against the lower benefits that would likely result from the reduced payments called for by the reform law, but that can’t possibly be right; this Administration would never just play politics with health care.

Anyway, GAO examined the CMS subterfuge and found that it was wasteful and should be cancelled and the reform law provisions allowed to go into effect.  GAO basically said it was a farce to call this a demonstration, that the program did not appear to be budget neutral, that it appeared to have no effect on quality and the design made it almost impossible that it could do so, since it rewarded past performance, not the future performance under the “demonstration”.   HHS objected to GAO’s findings, but GAO very effectively rebutted the objections.  The real problem with Medicare Advantage reimbursement is that it is not a true competitive bidding situation–payment should be based on the lowest bid in a geographic area, and it isn’t.  Changing to a truly competitive method would lower costs, likely without affecting the benefits available to beneficiaries, and might also allow beneficiaries to choose from a wider range of benefit/premium tradeoffs.

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