New Medicare Advantage Report Raises Old Issue

From time to time, we have noted that Medicare Advantage (MA) plans have been increasing their share of the Medicare marketplace. A Medicare Advantage option - which is currently the cheapest option - is available under UC's retiree health insurance program. Under Medicare Advantage, a private insurer receives risk-adjusted premiums from Medicare, and takes the place of "traditional" Medicare. It administers the plan, determines eligibility for treatment, etc.

At one point, it appeared that UCOP wanted to replace its entire traditional wrap-around options for Medicare retirees with Medicare Advantage. While such a policy seems to be currently off the table, the fact that the Medicare Advantage option is the cheapest choice could lead to an increasing share of UC's retirees ultimately electing that option. The traditional wrap-around plans could become unsustainably costly as the better risks gravitate to Medicare Advantage. We have blogged about this matter in the past.*

Nationally, 46% of Medicare recipients were under privatized Medicare Advantage in 2021 and the share has been growing. If the growth continues, a majority of Medicare recipients will be under Medicare Advantage in a few years. (As we have noted in the past, those calling for "Medicare for All" - by which they seem to mean a federally-operated single-payer plan - don't seem to realize that Medicare is fast becoming a privatized program dominated by a few major insurance companies.)

A federal agency - the Medicare Payment Advisory Commission (MedPAC) - has recently reported on Medicare Advantage.** It notes that the share Medicare Advantage of the Medicare market has been growing and finds that, contrary to congressional hopes, Medicare Advantage costs more per participant than traditional Medicare. The report makes three points of special relevance: [page 409]

• Increasingly robust MA enrollment, plan availability, and rebates [offered by private MA insurers are being] financed by higher payments relative to FFS (fee for service, i.e., traditional Medicare) spending.
• Risk adjustment: Coding intensity inflates payments to MA plans, i.e., private insurers are finding ways to bill more to Medicare.
• Quality in MA is difficult to evaluate.

Congress at the moment has deep divisions and other priorities. Eventually, however, it may decide to cut back on Medicare spending as more and more of the baby boom retires. At that point, it might crack down on Medicare Advantage spending, an eventuality that would likely lead to higher premiums for retirees and possibly fewer private insurers competing for Medicare Advantage business.

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*https://uclafacultyassociation.blogspot.com/2022/02/an-advantage-to-provider-of-uc-advantage.html; https://uclafacultyassociation.blogspot.com/2021/11/what-happens-at-uc-if-medicare.html.

**https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_SEC.pdf.