Medicare Advantage Savings for Beneficiaries

There continue to be concerns about whether CMS overpays Medicare Advantage plans relative to the cost of enrollees if they were in the fee-for-service branch of Medicare.  One thing that is pretty clear is that Medicare Advantage generally saves beneficiaries money.  A UnitedHealth Group brief gives examples of those savings.   (UHG Brief)   The brief focuses on relative costs for a 72 year-old beneficiary in average health.  It looks at both premium costs and out-of-pocket spending.  FFS Medicare covers about 83% of costs for hospital and physician services.  Beneficiaries also pay a Part B premium that is dependent on income.  And if they are in Part D, the drug coverage, they may have an additional premium.  Medicare Advantage plans almost always include drug coverage.  They tend to have minimal cost-sharing amounts and increasingly, do not charge an additional premium to the enrollee.  They also may cover services not covered at all by Medicare.  The analysis finds that this average beneficiary would pay $5109 in premiums and cost-sharing for FFS Medicare annually if they were enrolled in Part D as well, $5441 if they were enrolled in Part D and a lower level Medicare Supplement plan and $5960 if they were enrolled in the highest level Medicare Supplement plan.  By contrast, that beneficiary in a Medicare Advantage plan with drug coverage would have only $3632 per year in out-of-pocket spending.  That is a 30% to 40% saving for the beneficiary.  And it doesn’t include the value of the added benefits a Medicare Advantage plan typically provides.  So it is no wonder that MA has seen extensive enrollment growth in the last few years, especially among lower-income beneficiaries.  Unfortunately, CMS isn’t probably doing as well.  Most analyses suggest that CMS might now be paying slightly less for the same beneficiary if they are in Medicare Advantage versus the fee-for-service arm of Medicare.  That is Congress’ fault for not setting the payment mechanism in a manner that forces the plans to compete more directly on price.  Research pretty definitively suggests that Medicare Advantage plans have lower actual health spending on the same beneficiary than that beneficiary would incur in fee-for-service Medicare.  But most of that spending difference accrues to the benefit of the MA plans, which are generally pretty profitable, and therefore eager to increase their MA business.