Under traditional Medicare - for which most emeriti/retirees are eligible after age 65, Medicare makes the basic decisions. Uncovered costs are then paid, or partially paid, by private wrap-around insurance plans such as those offered by UC.
The proportion of the US Medicare-eligible population now under Medicare Advantage has been rising and is now up to 45%. If trends continue, a majority of that population will be under privatized plans. The trend to Medicare Advantage/privatization has continued under both Democratic and Republican administrations. (The fact that Medicare is becoming privatized seems to have totally escaped those folks calling for "Medicare for All," by which they seem to mean a public government-run single-payer plan.)
It may seem surprising that private insurance companies would be anxious to provide insurance for a population that is obviously more prone to health problems than the younger population. But whether insurance coverage is profitable depends on what premiums can be charged. In this case, it is the federal government that is providing the incentive. There is growing suspicion that the feds are overpaying the private insurers that offer Medicare Advantage, thus explaining their eagerness to expand to ever-increasing proportions of the Medicare market. Anyone 65+ at this time of year will be receiving mailers enticing them to switch to Medicare Advantage or see such ads on late-night TV.
NPR provides the latest information in the item reproduced below on what the overpayment issue. Below that item, some further thoughts for UC are provided.
Medicare Advantage's cost to taxpayers has soared in recent years, research finds
November 11, 2021 FRED SCHULTE Kaiser Health News NPR
Medicare Advantage health plans have enrolled nearly 27 million members, or about 45% of people eligible for Medicare. A recent analysis finds Medicare overpaid the private health plans by more than $106 billion from 2010 through 2019 because of the way the plans charge for sicker patients.
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, says 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.
"They are paying [Medicare Advantage plans] way more than they should," says 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," says 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.
Some insurers see 'eye-popping' revenue gains
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.
"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," says 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 says 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," says 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 says 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.
The formula for higher profits: Score patients as sicker than they are
Much of the debate centers on the complex method used to pay the health plans.
In original Medicare, medical providers bill for each service they provide. By contrast, Medicare Advantage plans are paid using a coding formula called a "risk score" that pays higher rates for sicker patients and less for those in good health.
That means the more serious medical conditions the plans diagnose the more money they get — sometimes thousands of dollars more per patient over the course of a year with little monitoring by CMS to make sure the higher fees are justified. According to whistleblower complaints calling out this practice of upcoding, three of the conditions frequently given a higher risk score by Medicare Advantage plans include cases of diabetes with complications, major depression and congestive heart failure.
Congress recognized the problem in 2005 and directed CMS to set an annual "coding intensity adjustment" to reduce Medicare Advantage risk scores and keep them more in line with original Medicare.
But since 2018, CMS has set the coding adjustment at 5.9%, the minimum amount required by law. Boccuti said that adjustment is "too low," adding that health plans "are inventing new ways to increase their enrollees' risk scores, which gain them higher monthly payments from Medicare."
Some of these coding strategies have been the target of whistleblower lawsuits and government investigations that allege health plans illegally manipulated risk scores by making patients appear sicker than they were, or by billing for medical conditions patients did not have. In one recent case, the Justice Department accused Kaiser Permanente health plans of obtaining about $1 billion by inflating risk scores. In a statement, the insurer disputed the allegations. (KHN is not affiliated with Kaiser Permanente.)
"Little evidence" those higher payments are justified
Legal or not, the rise in Medicare Advantage coding means taxpayers pay much more for similar patients who join the health plans than for those in original Medicare, according to Kronick. He says there is "little evidence" that higher payments to Medicare Advantage are justified — there's no evidence their enrollees are sicker than the average senior.
Kronick, who has studied the coding issue for years, both inside government and out, says that risk scores in 2019 were 19% higher across Medicare Advantage plans than in original Medicare. The Medicare Advantage scores rose by 4 percentage points between 2017 and 2019, he says — faster than the average in past years..
Kronick says that if CMS keeps the current coding adjustment in place, spending on Medicare Advantage will increase by $600 billion from 2023 through 2031. While some of that money would provide patients with extra health benefits, Kronick estimates that as much as two-thirds of it could be going toward profits for insurance companies.
AHIP, the industry trade group, did not respond to questions about the coding controversy. But a report prepared for AHIP warned in September that payments tied to risk scores are a "key component" in how health plans calculate benefits they provide and that even a slight increase in the coding adjustment would prompt plans to cut benefits or charge patients more.
That threat sounds alarms for many lawmakers, according to Kronick. "Under pressure from Congress, CMS is not doing the job it should do," he says. "If they do what the law tells them to do, they will get yelled at loudly, and not too many people will applaud."
There are two potential effects at UC of offering a cheap Medicare Advantage plan. It tends to attract participants - particularly those who perceive themselves in relatively good health - to selected the Medicare Advantage plan (and de-selected traditional Medicare wrap-around plans). In addition, because what is charged to participants as their share of the premium payments depends on the lowest-cost plan, it increases the out-of-pocket premium costs for those who stay in non-Medicare Advantage plans (which adds to the incentive to switch to Medicare Advantage).
As the article above notes, although there is some awareness in Congress that the federal government is overpaying for Medicare Advantage, the typical political gridlock has set in. In particular, those who lean towards privatization prefer the situation as it is. The system self-privatizes without any explicit change in the law. Of course, the political balance at some point might switch as costs increase with further enrollments in Medicare Advantage and fewer in traditional Medicare.
What might happen if the privatization subsidy is someday removed at UC is unclear. By that time, however, much of the UC participation might be in the Medicare Advantage plan with the alternatives largely undermined.
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