Medicare To Pay 8.4% More for Beneficiaries in Managed Care Plans Under New Law, Report Finds
The federal government will pay an average of 8.4% more for Medicare beneficiaries enrolled in managed care plans than those in traditional fee-for-service Medicare under the new Medicare law, according to a report released on Thursday by the Commonwealth Fund, the AP/Las Vegas Sun reports. Under the Medicare law, managed care plans will receive an additional $14 billion to $46 billion in payments over the next 10 years. According to the report, the government will pay an average of $552 more for each of the five million Medicare beneficiaries enrolled in managed care plans, or a total of $2.75 billion, in 2004. The report assumed that Medicare beneficiaries enrolled in managed care plans have the same health status as those in fee-for-service Medicare. However, Medicare beneficiaries who enroll in managed care plans often are healthier than those in fee-for-service Medicare, and the government pays managed care plans the same amount regardless of whether beneficiaries use medical services, according to the report. As a result, the report likely underestimates the difference between the average amount that the government pays for Medicare beneficiaries enrolled in managed care plans and those in fee-for-service Medicare, according to Brian Biles, a professor at George Washington University and an author of the report (Sherman, AP/Las Vegas Sun, 5/19).
According to the Commonwealth Fund report, the additional payments for managed care plans under new Medicare law "explicitly increased Medicare costs in 2004 and through 2013." Medicare managed care plans will use half of the payments to reduce premiums and increase services, use most of the remainder to cover increased medical costs and retain about 5% as profit, the report said (AP/Las Vegas Sun, 5/19). Biles said that the results of the report "suggest that private health plans don't save more money" (Reuters/Arizona Daily Star, 5/20). Karen Ignagni, president and CEO of America's Health Insurance Plans, criticized the report as "a head-in-the-sand kind of analysis," adding, "The underlying goal here is to go back to no choices for beneficiaries" (AP/Las Vegas Sun, 5/19).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.