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Medicare Advantage Programs

Editor’s note: With almost every mention of health care reform and looking for ways to pay for it, reductions in funding for Medicare Advantage programs are mentioned. Are the extra costs, in part, an explanation of why administrative costs in private insurance plans is higher than basic medicare? That is to say that there are marketing costs, extra services around disease management and so forth. Here is an article by John Goodman.


Hostility Toward Medicare Advantage Plans. About one in every four seniors is enrolled in a Medicare Advantage (MA) Plan, a private alternative to conventional Medicare. These plans have primarily low- and moderate-income members — seniors who have too much income to qualify for Medicaid, but are generally too poor to be able to afford supplemental, medigap insurance. Without Medicare Advantage, these seniors would have only the skimpy benefits that Medicare provides — leaving them exposed to thousands of dollars in potential out-of-pocket costs. With Medicare Advantage, they have the kind of coverage comparable to what most nonseniors have.

An enormous amount of consternation exists over the fact that the government is paying MA plans about 13% more than what would have been spent under conventional Medicare. This is partly explained by the influence of members of Congress who represent rural areas and who want MA plans to be available to seniors who would not otherwise have access to them.

In any event, the “overpayments” in rural areas and some urban areas have resulted in extra benefits, including lower out-of-pocket payments and better coverage for drugs, preventive care, and chronic disease care. On the average, MA plans provide approximately $825 in added benefits annually compared to traditional Medicare.

However, these extra benefits vary radically, from one area to another. In places like Florida, where basic Medicare apparently substantially overpays for services, MA plans are able to provide substantial extras for Medicare’s average payment. In Minnesota, by contrast, Medicare payments to providers are less generous and MA plans provide fewer extra benefits.

On measures of quality and efficiency, how do MA plans stack up against conventional Medicare? Quite well. According to a study by AHIP (which represents MA insurers):

  • MA enrollees had 33% more doctor visits (presumably representing more primary care), yet experienced 18% fewer hospital days and 10% fewer hospital admissions.
  • More importantly, MA enrollees had 27% fewer emergency room visits, 13% fewer avoidable admissions and 42% fewer readmissions.


August 30, 2009 - Posted by | Federal Government, healthcare | , ,

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