Reforming Medicare Advantage

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<p>In drafting health reform legislation, one of the challenges Congress faces is finding the financial resources to pay for insurance coverage for millions of currently uninsured individuals. One potential source of savings is the elimination of extra payments to private health plans participating in the Medicare Advantage (MA) program. <br /><br />In a <a href="/publications/issue-briefs/2009/dec/medicare-advantage-reforms-comparing-house-and-senate-bills">new issue brief</a> analyzing the MA payment policy provisions of the congressional health reform bills, George Washington University's Brian Biles, M.D., and Grace Arnold explain that while the extra payments received by MA plans underwrite additional benefits to some beneficiaries, they increase Medicare spending, which is financed by all taxpayers. In addition, because they receive payments far in excess of traditional Medicare spending, private plans have less incentive to provide care efficiently. </p>
<p>The Medicare Advantage program was created with the presumption that private plans can operate more efficiently than traditional Medicare and can be more responsive to beneficiaries' needs. But as a result of policy changes enacted in the Medicare Modernization Act of 2003 and subsequent legislation, MA plans in 2009 will be paid $11 billion more than their enrollees would have been expected to cost under traditional Medicare. Eliminating these extra payments, as proposed in the bill approved by the House of Representatives, would reduce Medicare spending by $170 billion over 10 years; the corresponding provision in the Senate bill would produce an estimated $118 billion in savings. </p>
<p>There are marked differences in the strategies the Senate and House bills employ to reduce MA extra payments. Yet both attempt to encourage MA plans to provide coordinated care for their enrollees efficiently and effectively, and to improve the value Medicare obtains. <br /><br /></p>