Earlier in the year, I made some predictions for fun. Some came true, some aren’t looking too good right now. One of my favorite predictions was in relation to the MedPAC June 2009 Databook which is widely quoted for its estimate that Medicare Advantage plans are paid 14% more than Original Medicare. My prediction in January was that the number would be lower than 2009 and in fact would be less than 10%.
I’ve blogged about this many times including the fact that the majority of the 14% payment goes back to the Medicare Beneficiary and not to the Insurance Companies (the number is 76.7% of excess payment goes to the 11+ million Seniors in the plans, see my blog post here for details).
Interestingly, MedPAC issued a March report which shows on page 266 table 4.3(b) that the “excess payment” is currently estimated at 9%. Further, since the MA bids for A&B services was 100% of Original Medicare, ALL of this excess payment is going to Medicare Beneficiaries in the form of lower cost sharing and/or enhanced benefits.
Essentially, MA companies are CURRENTLY ABLE to deliver A&B services (including their admin costs and profit) for exactly the same cost as Medicare does it and the 9% excess payment sweetens the pot for those 11 million who are enrolled in the Medicare Advantage program.
It’s perfectly reasonable to argue whether or not it’s fair that the Medicare Beneficiaries who are enrolled in these plans get a sweeter deal, however, let’s just be honest about who’s actually going to end up financing the projected $136 Billion in MA cuts. I never see this reported, however.
As a side note, the $136 Billion in MA cuts which CBO projected as a result of ACA will never actually materialize. This is true since the “excess payment” was calculated at 14% of OM when the actual number for 2010 in the absence of the ACA legislation was really 9% (per MedPAC in March 2010). The true number should be closer to $87 Billion, leaving a 10 year shortfall of $49 Billion. That shouldn’t be entirely surprising, however, given how the CBO does its math!
[...] the ten year savings projected may not materialize. I have not done the research myself, but the Ritter Blog has and you may want to take a look. This article also contains links to Medicare data. As a side [...]