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12/19/2008 - Medicare Advantage Insurance Plans More Profitable Than Anticipated
GAO: MA Plans Reaped $1.3 Billion More in Profits Than Expected
Bolsters NAHC Call to Eliminate Excessive Payments
Medicare Advantage (MA) plans took in $3.36 billion in profits in 2006, nearly $1.3 billion more than projected, according to a new Government Accountability Office (GAO) report. It was the second year in a row the plans exceeded profit projections.
MA plan payments from the government are structured, in part, on the insurance companies' projected revenues and expenses. According to GAO, had the companies projections been more accurate, a good portion of that $1.3 billion could have been applied toward enhanced health benefits or lower monthly premiums, while still allowing the companies their anticipated profit margin.
The GAO used 2006 MA data for the study, the most recent year for which figures were available. The study was requested by House Ways and Means Health Subcommittee Chairman Pete Stark (D-CA), who said the government ends up spending on average about 13% more on MA beneficiaries than those in the traditional Medicare fee-for-service (FFS) program.
"This puts to bed this idea the plans are offering tremendous extra benefits with the overpayments," Stark said. "The overpayments are going to profits."
The findings echo those from a Commonwealth Fund study in late 2006 (NAHC Report, Dec. 1, 2006). It found that the government pays substantially more (12.4%) for MA plan enrollees than for FFS Medicare beneficiaries. The findings contrast sharply with the stated goals of creating incentives for private plans to enroll Medicare beneficiaries: to save money by privatizing what was established as a health care entitlement program for seniors and disabled individuals.
"Study findings clearly indicate that privatizing the Medicare benefit is not an effective way to save money and, given the poor financial state of the Medicare trust funds, Congress should take steps to ensure that the Medicare program is not spending more than it needs to for care," National Association for Home Care & Hospice President Val J. Halamandaris said.
NAHC has recommended that Congress limit reimbursement to private plans for Medicare to a level consistent with the costs borne by the program for comparable traditional FFS beneficiaries. NAHC will continue to advocate for this position as a new Congress and the new administration under President-elect Barack Obama take office next year.
The full GAO report, "Medicare Advantage: Characteristics, Financial Risks, and Disenrollment Rates of Beneficiaries in Private Fee-for-Service Plans," is available on the GAO website here.
