Medicare Advantage overpayments higher than estimated: study

What they found: Researchers said the excess amounts are higher than previously recognized, noting that beneficiaries that flock to private Medicare plans have significantly lower expenditures than those with similar risk factors who remain in traditional Medicare.

• They suggested overhauling the current payment approach that links private plan rates to average spending by traditional Medicare beneficiaries.
• Another option would be to institute competitive bidding by Medicare Advantage plans to determine what insurers are paid.

By the numbers: The Medicare Payment Advisory Commission has estimated annual overpayments of 6% or $27 billion.

• But the USC Schaeffer analysis found those beneficiaries who switched to Medicare Advantage plans have lower spending than those with similar health risks who remain in traditional Medicare. Factoring this "favorable selection" more than doubles prior overpayment estimates to more than 20% or $75 billion annually, researchers said.