CBPP recommends cutting payments to Medicare Advantage Plans

April 3, 2007

Private “Medicare Advantage” health plans were brought into Medicare to reduce costs, but Medicare pays them 12 percent more than the cost of treating comparable beneficiaries through traditional Medicare, adding billions to Medicare’s costs.
Private plans argue that curbing the overpayments would harm low-income and minority Medicare beneficiaries, who they claim rely disproportionately on Medicare Advantage for supplemental coverage. This claim, however, is based on misleading use of data.
Medicaid, not Medicare Advantage, is the main form of supplemental coverage for low-income and minority Medicare beneficiaries. The most cost-effective way to help these individuals would be to strengthen the programs within Medicaid on which many of them rely to supplement Medicare coverage and to pay the Medicare premiums for them.
Moreover, the overpayments are harming millions of minority beneficiaries by raising their monthly Medicare premiums. The overpayments also are weakening Medicare’s finances and ballooning its costs, thereby building pressure for sizable Medicare cuts in the future.
Curbing overpayments to Medicare Advantage plans would benefit Medicare beneficiaries by reducing costs and premiums and improving Medicare’s long-term fiscal sustainability.

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