Profit for Medicare Advantage Plans in 2006 Exceeds Projections

Insurers offering Medicare Advantage plans made $1.3 billion more in profit in 2006 than projected, according to a Government Accountability Office report expected to be released Thursday, the AP/Albany Times Union reports.

The federal government bases its payment rates for MA plans partly on the plans' anticipated revenue and expenses.

The report looked at the MA program for 2006, the most recent year for which data are available. MA insurers reported $50 billion in revenue that year.

On average, insurers earned profits of 6.6%, compared with the 4.1% they had projected. They also spent less than expected on covering medical expenses, with 83.3% of revenue going toward medical expenses, compared with the nearly 87% that was projected.

House Ways and Means Health Subcommittee Chair Pete Stark (D-Calif.) -- who requested the analysis -- said that the federal government spends on average 13% more on MA plans than traditional Medicare.

Stark said that the GAO report "puts to bed this idea [that] the plans are offering tremendous extra benefits with the overpayments," adding, "The overpayments are going to profits." He said he plans to push for legislation next year that would lower the federal government's payments to MA plans.

Federal officials said that the profits are within the normal range, "given the difficulty in forecasting medical trends and spending," the AP/Times Union reports.