Is Medicare Still Paying Private Health Plans Too Much?
<p>The way private insurance plans are paid to provide benefits to Medicare enrollees does not encourage plans to be as efficient as they could be, a new Commonwealth Fund–supported analysis finds.</p><p>Researchers Stephen Zuckerman and Laura Skopec of the Urban Institute and Stuart Guterman find that the bidding system Medicare uses to induce Medicare Advantage plans to provide benefits at lower costs is not having its intended effect in many regions of the U.S. Plans in counties where Medicare’s benchmark payments are higher tend to have higher costs. They also receive larger rebates — the bonuses that plans earn if their costs come in lower than their bid. Each $1.00 increase in benchmark payments is associated with plan costs that are $0.32 higher and rebates that are $0.52 higher, even when controlling for market and plan factors that can affect costs.</p>
<p>To incentivize plans to be more efficient, the authors say Medicare may need to change the way it sets benchmarks, or even eliminate them altogether from the bidding process. Otherwise, insurers may continue to exploit geographic variation in payment benchmarks to capture extra revenue, without passing it along as additional benefits to enrollees or as savings to the Medicare program.</p>