A new report issued by the Government Accountability Office has found that one-out-of-three Medicare Advantage beneficiaries is in a plan spending more than 15 percent of its projected Medicare payments on overhead and profit.
The report also found that the more market concentration there is in a given area, the higher insurance companies bid Medicare on prices.
The report comes as Medicare Advantage faces debate on Capitol Hill, with the GOP in favor of the plans and Democrats saying they're too costly. A provision in the Affordable Care Act calls for all health insurance companies to hold administrative costs to below 15 percent.
[Find out what insurance plans think of the medical loss ratio regulation.]
"Republicans like to say that they're going to use competition to drive down the costs of Medicare, but a close look at the data reveals that there is only limited competition in the vast majority of the country," said Rep. Henry Waxman (D-Calif.), ranking member of the House Energy and Commerce Committee. "That's why the improvements to Medicare in the Affordable Care Act are so important – they'll bring Medicare costs down to ensure its solvency for years to come."
Rep. John Dingell (D-Mich.) said the report confirms Democrats' suspisions that big plans dominate most parts of the country, increasing costs for beneficiaries and taxpayers.
"Health reform will change this beginning in 2014, ensuring health insurance companies in Medicare will be required to offer decent value for beneficiaries and taxpayers," he said.
At a House Ways and Means Committee hearing Thursday, Donald Berwick, MD, administrator of the Centers for Medicare and Medicaid Services, said CMS has improved its oversight and management of the Medicare Advantage program.
"In 2011, premiums are lower and enrollment is projected to be higher than ever before," he said. "In fact, the insurers that participate in Medicare Advantage have projected 5 percent growth in enrollment in this part of the program. As part of CMS' national strategy for implementing quality improvement in healthcare, CMS is also working to create new incentives for all MA plans to improve the care they offer to Medicare beneficiaries."
[Read more about one of CMS' improvement programs for MA.]
The full GAO report is available here.