Medicare Advantage Rates

Medicare Advantage plans have been under fire for getting paid too much and making too much money.  The crux of the issue is the Medicare formula that takes into account beneficiary health status in setting payments.  This incents plans to identify every possible health issue a beneficiary may have and then some.  And the plans have done so, even if the supposed problem doesn’t need or doesn’t get any treatment.  Medicare has an advisory group on reimbursement called the Medicare Payment Advisory Committee or MedPAC.  It has inflamed the issue by analyses that say that the MA plans get paid much more for the same beneficiary than Medicare would pay if the beneficiary stayed in fee-for-service or traditional Medicare.

MedPAC says that in 2026 the excess will be 14%.  Critiques of the MedPAC analysis abound, some by the MA plans and their agents, but many by independent researchers.  The Center for Medicare Services, which manages the Medicare program, released its own analysis of potential overpayments and found it to be more in the range of 1.5% to 2%, or $5 to $6 billion.  Not nearly the huge issue MedPAC claims.  The primary problem is that MedPAC does not adequately acknowledge that fee-for-service Medicare does a very poor job of managing a beneficiary’s overall health and proactively identifying and managing conditions that likely will worsen.

MedPAC does good work, but it is largely composed of academics and hospital-employed physicians who have a certain bias.  MA is great for beneficiaries–it provides far more benefits than traditional Medicare at a lower cost and it has repeatedly been shown to produce better outcomes.  Far from cherrypicking, the least healthy beneficiaries are more likely to end up in MA plans and to benefit from that enrollment.  MA coding needs to be fixed and some changes have already been made, but the MedPAC assault is flawed and would harm beneficiaries.