Medicare Disadvantage

From time to time on this blog, we have taken note of the growth of seemingly-cheap Medicare Advantage plans which now cover more than half of the Medicare-eligible population, thanks to insurance company promotions. UC offers Medicare Advantage to those retirees eligible for health insurance. At one point, there was a push at UCOP to turn the entire retiree health offering into a Medicare Advantage system, although protests halted that development.

In addition, UCLA Health now has created its own Medicare Advantage plan for LA County residents (although NOT for UC retirees).

The idea behind Medicare Advantage originally was that privatizing Medicare would save money. But it has long appeared that in one way or another, there was overcharging going on. (If you think about the idea of offering medical insurance to individuals who are more likely than the general population to have costly health issues, and then think about the eager TV and other promotions to attract enrollees, you might not be surprised about overcharging.)

Anyway, the Congressional Joint Economic Committee has now come out with a report: 

Executive Summary

Medicare Part B premiums are higher because Medicare Advantage (MA) is overpaid. On average, covering a beneficiary in MA costs an estimated 120 percent of what it would cost in Traditional Medicare (TM). MA overpayments raise Part B spending, and because premiums are set to cover roughly one-quarter of expected costs, everyone in Part B pays more.

The Joint Economic Committee estimates MA overpayments increased Part B premiums by $212 per enrollee in 2025, totaling $13.4 billion in higher premiums. Since 2016, MA overpayments have added an estimated $82 billion to Part B premiums. TM beneficiaries, who are not enrolled in MA, bore roughly $6 billion of that burden.

Higher Part B premiums reduce seniors’ net Social Security benefits. About 85 percent of the added premium burden falls on individuals, with the remainder falling on state and federal taxpayers. For most seniors, Part B premiums are withheld from Social Security checks. Therefore, increases in premiums directly reduce take-home benefits for seniors.

Seniors face a dramatic reduction in the affordability of Medicare Part B. By 2035, per-person premiums are projected to double from $2,440 to about $5,000. Of that total, about $450 will be due to overpayments if they continue at the same rate. Aligning MA payments with TM would prevent unnecessary premium growth, increase the affordability of Medicare, and protect net Social Security checks.

Full report at https://www.jec.senate.gov/public/vendor/_accounts/JEC-R/issue-briefs/The%20Part%20B%20Premium%20Pass-Through.pdf.

Congress is currently dysfunctional and we don't know what the midterm elections will bring. But it seems likely that at some point, maybe in the not-so-distant future, there will be changes in current policy with regards to Medicare Advantage.