Private health insurance plans serving Medicare beneficiaries will be paid $11.4 billion more in 2009 than the traditional Medicare fee-for-service program, a new Commonwealth Fund study finds.
The study comes as stakeholders debate the value of Medicare Advantage, a program that offers an HMO-type coverage for Medicare beneficiaries. President Barack Obama's 2010 fiscal year budget proposes to pay for health reform by slashing reimbursement to health plans participating in Medicare Advantage.
However, many Republicans favor the program.
The new analysis, conducted by researchers at George Washington University and the Commonwealth Fund, estimates that since Medicare Advantage was enacted in 2004, $43 billion in extra payments have been made to private plans.
Congress mandated funding for Medicare Advantage under the Medicare Modernization Act of 2003, which was intended to expand the role of private plans in Medicare in an effort to reduce growth in Medicare spending.
Recent Congressional Budget Office reports show that bringing payments to private Medicare Advantage plans in line with fee-for-service Medicare would save $157 billion over the next 10 years.
"It is clear that private plans are continuing to substantially raise the cost of serving Medicare beneficiaries," said Commonwealth Fund President Karen Davis. "Modifying these payments in 2010 is an excellent first step, but policymakers should examine whether or not these plans are the best use of Medicare dollars for the beneficiaries they were designed to serve."
Recent steps taken by the Centers for Medicare and Medicaid Services that reduce the payments made to private MA plans in 2010 do not address the factors responsible for the extra payments, say the authors of the study, led by George Washington University's Brian Biles, MD.
"We have to ask ourselves if this is the best use of our healthcare dollars – or if those dollars could be better spent improving Medicare benefits for all beneficiaries or expanding health insurance coverage," Biles said.