Jun 14, 2023 - Health

Medicare Advantage overpayments higher than estimated: study

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Illustration: Shoshana Gordon/Axios

Overpayments to insurers administering Medicare Advantage plans now exceed $75 billion a year due to aggressive coding of patients' health conditions and easily-achieved bonus payments tied to quality, researchers with the USC Schaeffer Center for Health Policy & Economics found.

Why it matters: More seniors are choosing private Medicare Advantage plans over traditional Medicare, and continued overpayments could threaten the long-term viability of the program.

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.
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