Medicare advantage costs often exceed traditional Medicare costs

From the Commonwealth Fund:

Health plans participating in Medicare Advantage (MA), the private insurance option for Medicare beneficiaries, have long been paid considerably more to provide coverage of hospital and physician services than what the government spends to deliver the same benefits to enrollees in traditional Medicare.

Under the Affordable Care Act, overpayments to these plans are gradually being pared back. But will private plans be able to cope with the reduced payments?

Using newly available government data, Marsha Gold, a senior fellow with Mathematica Policy Research, found that risk-adjusted MA plan costs in 2009 were, on average, 4 percent higher than those for traditional Medicare. Among plan types, only health maintenance organizations (HMOs) had lower average costs, while costs for more than 75 percent of local preferred provider organizations (PPOs) and private fee-for service plans exceeded traditional Medicare’s. According to Gold, the wide variation in MA plan costs relative to traditional Medicare suggests there is room for many of these plans to deliver care more efficiently and keeps costs down.

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