Medicare Advantage plans, which consolidate various Medicare parts, have become a critical part of the healthcare landscape. In 2022, nearly half of the newly eligible beneficiaries, amounting to 1.6 million people, chose to enroll directly into these plans instead of the traditional Medicare.
These plans compete by submitting bids against benchmark costs derived from legacy Medicare. The competition ensures bids often fall below these benchmarks. Consequently, plans receive rebates from the Centers for Medicare & Medicaid Services (CMS), which translate into cost benefits for beneficiaries, such as lower premiums and extra benefits.
There has been a recent contention between administrations over how benchmarks are set. The Biden administration aimed to replace Medicare Advantage plans by setting lower benchmark growth rates. In contrast, before leaving office, it was announced that the Trump administration had set benchmarks that more closely aligned with actual Medicare spending growth.
A controversy arises from analysis by the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues. MedPAC alleged that CMS pays significantly more to Medicare Advantage plans compared to what legacy Medicare would spend. MedPAC attributes this to practices such as "risk selection" and "coding intensity" by the plans.
However, MedPAC's findings remain disputed and allegedly unsupported by concrete data. Even the commission concedes its inability to quantify factors like coding intensity comprehensively. A report by FTI Consulting challenges MedPAC’s analysis, highlighting the challenges of estimating cost differences between government and private plan offerings due to various influencing factors.
Moving forward, the administration and Congress are advised to reconsider MedPAC's conclusions to avoid jeopardizing access to Medicare Advantage plans, which many seniors rely on.
