Medicare Advantage plans cost billions more than Medicare

Nov. 12, 2021

Switching seniors to Medicare Advantage plans cost taxpayers tens of billions of dollars more than keeping them in original Medicare, a cost that has exploded since 2018 and is likely to rise even higher, new research has found, according to a new report published in KFF.

Richard Kronick, a former federal health policy researcher and a professor at the University of California-San Diego, said his analysis of newly released Medicare Advantage billing data estimates that Medicare overpaid the private health plans by more than $106 billion from 2010 through 2019 because of the way the private plans charge for sicker patients, according to a press release from to Kaiser Health Network.

Nearly $34 billion of that new spending came during 2018 and 2019, the latest payment period available, according to Kronick, who served as deputy assistant secretary for health policy in the Department of Health and Human Services during the Obama administration. The Centers for Medicare & Medicaid Services made the 2019 billing data public for the first time in late September.

Medicare Advantage, a fast-growing alternative to original Medicare, is run primarily by major insurance companies. The health plans have enrolled nearly 27 million members, or about 45% of people eligible for Medicare, according to AHIP, an industry trade group formerly known as America’s Health Insurance Plans.

The industry argues that the plans generally offer extra benefits, such as eyeglasses and dental care, not available under original Medicare and that most seniors who join the health plans are happy they did so.

“Seniors and taxpayers alike have come to expect high-quality, high-value health coverage from MA [Medicare Advantage] plans,” said AHIP spokesperson David Allen.

Yet critics have argued for years that Medicare Advantage costs taxpayers too much. The industry also has been the target of multiple government investigations and Department of Justice lawsuits that allege widespread billing abuse by some plans.

The payment issue has been getting a closer look as some Democrats in Congress search for ways to finance the Biden administration’s social spending agenda. Medicare Advantage plans also are scrambling to attract new members by advertising widely during the fall open-enrollment period, which ends next month.

KHN release