Paying Medicare Advantage by Competitive Bidding: How Much Competition Is There?

August 12, 2009 | Volume 65

Authors: Brian Biles, M.D., M.P.H., Jonah Pozen, and Stuart Guterman
Contact: Brian Biles, M.D., M.P.H., Department of Health Policy, School of Public Health and Health Services, The George Washington University, bbiles@gwu.edu
Editor: Christopher Hollander

Overview

Private health plans that enroll Medicare beneficiaries—known as Medicare Advantage (MA) plans—are being paid $11 billion more in 2009 than it would cost to cover these beneficiaries in regular fee-for-service Medicare. To generate Medicare savings for offsetting the costs of health reform, the Obama Administration has proposed eliminating these extra payments to private insurers and instituting a competitive bidding system that pays MA plans based on the bids they submit. This study examines the concentration of enrollment among MA plans and the degree to which firms offering MA plans actually face competition. The results show that in the large majority of U.S. counties, MA plan enrollment is highly concentrated in a small number of firms. Given the relative lack of competition in many markets as well as the potential impact on traditional Medicare, the authors call for careful consideration of a new system for setting MA plan payments.

Citation

B. Biles, J. Pozen, and S. Guterman, Paying Medicare Advantage by Competitive Bidding: How Much Competition Is There? The Commonwealth Fund, August 2009.