A new analysis estimates Medicare Advantage provides beneficiaries $32.5 billion a year in additional benefits and lower out-of-pocket costs, as scrutiny continues over more federal funding devoted to the plans.
The analysis, commissioned by the advocacy group Better Medicare Alliance and conducted by consulting firm Milliman, looked at the value delivered to Medicare by MA plans via additional benefits and reduced premiums for Part B and D coverage.
“At a time when lawmakers are weighing important policy considerations for seniors’ healthcare, Milliman’s findings demonstrate that Medicare Advantage delivers additional benefits and reduce cost-sharing,” said Mary Beth Donahue, Better Medicare Alliance’s president and CEO, in a statement Thursday.
Milliman looked at total payments made by Medicare to those in traditional Medicare and MA.
Milliman’s analysis said that while almost all of the payments for traditional Medicare go toward Part A and B expenses, 75% of the payments to MA are spent on the same expenses and the remaining 25% go toward additional benefits, lower cost-sharing and premiums.
“We estimate the value of reduced cost-sharing and additional benefits at $123 per member per month: $48 for the reduction in cost-sharing for Medicare-covered services and $76 for the value of additional benefits not covered by traditional Medicare,” the analysis said. “Extrapolated to the approximately 22 million beneficiaries enrolled in individual Medicare Advantage plans, this equates to $32.5 billion annually in additional benefits.”
Some of the benefits offered by MA plans include dental, vision, hearing and supplemental benefits that include meals and nonemergency transportation. A recent analysis from Avalere Health found that the number of plans offering supplemental benefits will increase in 2022.
Milliman looked at traditional Medicare expenses based on information published in the 2020 Medicare Trustee’s report. The firm used its own pricing tools to calculate the bids for the 2021 MA plans under current MA payment methodology, the report said.
But Milliman did not address a Medicare Payment Advisory Commission report that estimated 2021 government payments were on average 104% of fee-for-service spending. The report included three percentage points of greater coding intensity by MA plans.
Milliman sought to look at discrepancies between MA and traditional Medicare via sensitivity testing.
The firm adjusted fee-for-service Medicare costs by plus or minus 5%.
“The sensitivity analysis shows that even with 5% lower [fee-for-service] Medicare costs for Medicare-covered services, MA is still less expensive in total program costs than [fee-for-service],” the report said. “These findings suggest that overall MA offers significant value for the government.”
Milliman found that government and beneficiary costs were $1,203 per beneficiary in fee-for-service compared with $1,055 for MA. Of the $1,203, the analysis found $949 was government costs and $253 for the beneficiary. Under MA, $943 were government costs compared to $113 to the beneficiary.
The analysis comes as scrutiny has increased over how much MA is costing the federal government.
An analysis, released last month by the Kaiser Family Foundation, estimated that the federal government spent $7 billion more on MA than traditional Medicare in 2019. A key reason was higher benchmark payments to MA plans and inaccurate coding practices leading to higher risk scores for enrollees and bigger payments.
Several articles in Health Affairs also shed light on coding practices where MA insurers sought to engage providers to code more diagnoses and boost risk scores. Some plans have bought providers outright or made deals to use tools such as artificial intelligence to identify additional coding opportunities.