A recent report from the Committee for a Responsible Federal Budget (CRFB) has revealed that Medicare Advantage plans may receive an excess of $1.6 trillion in government funding over the next decade. This startling finding has raised concerns about the sustainability of the Medicare trust fund.
The CRFB conducted a comprehensive analysis of insurance coding intricacies and the demographics of individuals enrolled in different types of Medicare plans. The study incorporated research from the USC Schaeffer Center for Health Policy and Economics and the Medicare Payment Advisory Commission (MedPAC). Additionally, the CRFB conducted its own research to estimate the extent of overpayments and their impact on the federal budget.
Medicare Advantage, the private-plan alternative to traditional Medicare, is found to cost the federal government significantly more per beneficiary. One contributing factor is the concept of “coding intensity,” where Medicare Advantage enrolls appear sicker than their counterparts in the traditional Medicare program. This disparity may result from incentives that encourage Medicare Advantage plans to report enrollees’ diagnoses more completely than physicians billing traditional Medicare. Consequently, these overestimated health conditions lead to higher payments.
Interestingly, despite the perception that Medicare Advantage beneficiaries are sicker than those in traditional Medicare, the report unveils that the former population is actually significantly healthier. As a result, overpayments are even greater than initially estimated, exacerbating concerns regarding the budgetary impact.
This forecast emphasizes the urgent need to reassess the financial implications of current Medicare Advantage funding practices. Failure to address this issue promptly could jeopardize the stability and longevity of the Medicare trust fund.
Medicare Advantage and the Issue of Overpayments
The Centers for Medicare and Medicaid Services (CMS) are supposed to adjust payments to account for differences in diagnostic reporting, known as coding intensity. However, according to a report by the Committee for a Responsible Federal Budget (CRFB), these adjustments have failed to correct the problem.
The CRFB warns that overpayments resulting from healthier beneficiaries signing up for Medicare Advantage and variations in coding intensity could amount to a staggering $810 billion to $1.6 trillion by 2033. This, in turn, could lead to higher Medicare premiums ranging from $140 billion to $260 billion.
Moreover, this situation threatens the solvency of the trust fund supporting Medicare. The anticipated depletion date for the Hospital Insurance trust fund, which serves Medicare Part A, is currently set at 2031. However, these overpayments could accelerate its insolvency by three to five years.
In light of these concerns, Josh Gordon, Director of Health Policy at the CRFB, emphasizes the need for change. Gordon states, “There’s increasing realization that overpayments are happening. It’s time to stop being afraid to make incremental changes to Medicare Advantage.”
Not only does this issue impact the stability of the Medicare trust fund, but it also has far-reaching consequences for the national budget. The CRFB estimates that overpayments in the next decade could increase the national debt by 2% to 5% of gross domestic product (GDP). They emphasize that such overpayments are detrimental to the overall federal budget.
In view of these findings, the CRFB urges both the Centers for Medicare and Medicaid Services and Congress to take appropriate action to rein in these overpayments. They stress that reforming Medicare Advantage is crucial for reducing costs for the federal government, the Medicare trust fund, and beneficiaries alike.