Medicare Advantage plans may be receiving overpayments of as much as 20%, finds a new study published by a health and aging think tank.
An analysis by the USC Schaeffer Center for Health Policy & Economics found that MA plans are being overpaid by $75 billion annually, much of that because the cheaper plans are attracting beneficiaries with lower cost needs.
More than half of all Medicaid beneficiaries are now enrolled in MA plans, which often deny or delay nursing home care and pay less for it than traditional Medicare. Providers and patients have recently been joined by federal regulators and Congress in criticizing such practices, as well as existing overpayment concerns.
“The current Medicare Advantage payment structure results in overpayments markedly higher than previously understood,” said Paul Ginsburg, senior fellow at the USC Schaeffer Center and professor of the practice at the USC Price School of Public Policy. “Our analysis highlights how Medicare Advantage currently operates and the need to reform how the plans are paid.”
The Medicare Payment Advisory Commission (MedPAC) had previously estimated that MA plans would be overpaid by $27 billion in 2023, primarily due to coding differences and excessive quality rating bonuses. But that didn’t include costs driven by the differences in spending between those who enroll in MA and those staying in traditional Medicare.
The USC researchers found that MA beneficiaries had significantly lower expenditures than those remaining in traditional Medicare with similar risk factors. Among the 7.1 million people who switched to MA from 2015 to 2019, payments were twice their expected expenditures.
“This finding is particularly galling when these same plans are often paying skilled nursing facilities and home health agencies only 60% to 80% of what Medicare FFS pays and denying MA enrollees access to medically necessary Medicare A & B services,” Nicole Fallon, vice president for integrated services and managed care policy for LeadingAge, wrote about the findings on Wednesday.
“These findings, in addition to the fact that the number of Medicare FFS beneficiaries is declining, underscore why policymakers must re-examine how MA plan payments are set,” she added.
MedPAC issued its annual report to Congress on Thursday. Among other findings, it called out similar concerns about MA overpayments.
“We estimate that beneficiaries who enroll in MA tend to be on average 11% less costly than their risk scores would predict,” James Matthews, PhD, executive director of the Medicare Payment Advisory Commission, said during a press briefing.
The costs of caring for patients in the Fee-for-Service program dictates payment to the alternative MA plans. So the implication of more costly beneficiaries staying in the traditional Fee-for-Service program, Matthews said, is that their higher costs are skewing payments. Medicare Advantage plans are getting paid more to care for their enrollees, who require less spending, outside of any cost control or patient management efforts, he said.
While this report to Congress did not include recommendations on the plan, Matthews said MedPAC laid out the other funding options and will likely pursue more analytical study of the issue in its next cycle of meetings.
Steven Lieberman, a nonresident senior fellow at the USC Schaeffer Center, said one reform would be to delink Medicare Advantage payments from FFS “as the current rate-setting system grows increasingly unreliable and problematic.”
Other potential strategies proposed by the center, and designed to protect Medicare’s long-term viability, would be to:
- include measures to reduce the impact of aggressive coding by plans
- mandate new data reporting requirements for MA plans to improve accuracy, completeness, and comparability of the data to make it more like claims data in traditional Medicare.
- institute competitive bidding by MA plans, using market forces to capture efficiency gains for taxpayers instead of higher benefits or profits for Medicare Advantage plans.
