Medicare Advantage plans costing billions more than they should, top researcher finds

Switching seniors to Medicare Advantage plans has cost taxpayers tens of billions of dollars more than keeping them in original Medicare, a cost that has exploded since 2018 and is likely to rise even higher, new research has found.

Richard Kronick, a former federal health policy researcher and a professor at the University of California-San Diego, said his analysis of newly released Medicare Advantage billing data estimates that Medicare overpaid the private health plans by more than $106 billion from 2010 through 2019 because of the way the private plans charge for sicker patients.

Nearly $34 billion of that new spending came during 2018 and 2019, the latest payment period available, according to Kronick. The Centers for Medicare & Medicaid Services made the 2019 billing data public for the first time in late September.

MEDICARE PAYING PLANS ‘WAY MORE THAN THEY SHOULD’

“They are paying [Medicare Advantage plans] way more than they should,” said Kronick, who served as deputy assistant secretary for health policy in the Department of Health and Human Services during the Obama administration.

Medicare Advantage, a fast-growing alternative to original Medicare, is run primarily by major insurance companies. The health plans have enrolled nearly 27 million members, or about 45% of people eligible for Medicare, according to AHIP, an industry trade group formerly known as America’s Health Insurance Plans.

The industry argues that the plans generally offer extra benefits, such as eyeglasses and dental care, not available under original Medicare and that most seniors who join the health plans are happy they did so.

“Seniors and taxpayers alike have come to expect high-quality, high-value health coverage from MA [Medicare Advantage] plans,” said AHIP spokesperson David Allen.

Yet critics have argued for years that Medicare Advantage costs taxpayers too much. The industry also has been the target of multiple government investigations and Department of Justice lawsuits that allege widespread billing abuse by some plans.

The payment issue has been getting a closer look as some Democrats in Congress search for ways to finance the Biden administration’s social spending agenda. Medicare Advantage plans also are scrambling to attract new members by advertising widely during the fall open-enrollment period, which ends next month.

‘BIG RED FLAG’

“It’s hard to miss the big red flag that Medicare is grossly overpaying these plans when you see that beneficiaries have more than 30 plans available in their area and are being bombarded daily by TV, magazine and billboard ads,” said Cristina Boccuti, director of health policy at West Health, a group that seeks to cut health care costs and has supported Kronick’s research.

Kronick called the growth in Medicare Advantage costs a “systemic problem across the industry,” which CMS has failed to rein in. He said some plans saw “eye-popping” revenue gains, while others had more modest increases. Giant insurer UnitedHealthcare, which in 2019 had about 6 million Medicare Advantage members, received excess payments of some $6 billion, according to Kronick. The company had no comment.

“This is not small change,” said Joshua Gordon, director of health policy for the Committee for a Responsible Federal Budget, a nonpartisan group. “The problem is just getting worse and worse.”

Responding to written questions, a CMS spokesperson said the agency “is committed to ensuring that payments to Medicare Advantage plans are appropriate. It is CMS’s responsibility to make sure that Medicare Advantage plans are living up to their role, and the agency will certainly hold the plans to the standards that they should meet.”

Making any cuts to Medicare Advantage payments faces stiff opposition, however.

On Oct. 15, 13 U.S. senators, including Sen. Kyrsten Sinema (D-Ariz.) sent a letter to CMS opposing any payment reductions, which they said “could lead to higher costs and premiums, reduce vital benefits, and undermine advances made to improve health outcomes and health equity” for people enrolled in the plans.

COMPLEX BILLING METHOD