Medicare Advantage Plans Cost More Than Fee-for-Service Programs

Medicare beneficiaries enrolled in private Medicare Advantage plans in 2005 cost the federal government $5.2 billion, or 12.4%, more than comparable beneficiaries enrolled in the traditional fee-for-service program, according to a study released on Thursday by the Commonwealth Fund, the AP/Long Island Newsday reports. About 5.6 million Medicare beneficiaries are enrolled in MA plans, managed care plans that are sponsored by private health insurers.

The study examined data from the Medicare Payment Advisory Commission and found that payments to MA plans in 2005 exceeded fee-for-service program costs among comparable beneficiaries by $922 per beneficiary. According to the study, the federal government should re-examine policies on payments to MA plans and consider other uses for the funds.

Stuart Guterman, senior program director for the Commonwealth Fund, said the federal government could use the funds to reduce premiums or improve benefits for Medicare beneficiaries. "The question isn't whether the private plans are good or bad," Guterman said, adding, "The question is: Is this the best use of money?"

Karen Ignagni, president and CEO of America's Health Insurance Plans, said that the study overstates the amount of payments to MA plans and that the group plans to calculate an independent estimate of the amount. She also said that Democratic lawmakers should not seek to revise policies on payments to MA plans because Medicare beneficiaries enrolled in the plans are satisfied with the level of benefits they currently receive.

Ignagni said, "The Democrats need to take a look at who we are serving" (Agovino, AP/Long Island Newsday, 11/30).

An issue brief of the study is available online. Note: You must have Adobe Acrobat Reader to view the issue brief.