Extra Payments to Medicare Advantage Plans to Total $8.5 Billion

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<p>Private health plans serving Medicare beneficiaries will be paid an average 12.4 percent more per enrollee in 2008, or about $986 more for each beneficiary, compared to what the same enrollee would have cost in the traditional Medicare fee-for-service program, according to a new study from The Commonwealth Fund.<br><br>In 2008 alone, extra payments to MA plans will total more than $8.5 billion, up from $3.9 billion in 2004. By the end of 2008, nearly $33 billion in extra payments will have been made since 2004.<br><br>Even if recently mandated payment reductions to private Medicare Advantage (MA) plans--scheduled to take effect beginning in 2010--had been fully in place in 2008, the plans still would have been paid 10.6 percent more than expected fee-for-service costs, say the authors of <a href="/publications/issue-briefs/2008/sep/the-continuing-cost-of-privatization--extra-payments-to-medicare-advantage
">The Continuing Cost of Privatization: Extra Payments to Medicare Advantage Plans in 2008</a>.<br><br>The higher payments for Medicare Advantage plans were originally intended as an upfront investment to stabilize plan participation and increase beneficiary enrollment, with the hope that the plans would eventually drive down the explosive growth of Medicare spending, says George Washington University's Brian Biles, M.D., the study's lead author. Instead, the policy has resulted in plan payments that substantially exceed comparable costs in traditional fee-for-service Medicare.<br><br>"The legislation passed this year only partially addresses the overpayment problem in Medicare Advantage, and private plans still substantially raise the cost of serving Medicare beneficiaries," said Commonwealth Fund President Karen Davis. "Policymakers should carefully examine whether extra payments to Medicare Advantage plans are the best use of dollars for the beneficiaries the program is designed to serve."</p>