Seniors save nearly $2,000 on average a year in total healthcare spending in Medicare Advantage (MA) compared to fee-for-service Medicare, a new study finds.
The study, published Tuesday, by the advocacy group Better Medicare Alliance finds that seniors spent $1,965 less including premiums and out-of-pocket costs on MA when compared to fee-for-service.
“We see particularly strong results for historically disadvantaged populations, including Black and Hispanic beneficiaries and those who are low-income,” said Allison Rizer, principal at the consulting firm ATI Advisory, which performed the study that examined 2019 Medicare Current Beneficiary Survey data.
ATI found that the average total spending in 2019 per beneficiary was $3,524 in MA compared with $5,489 for those in traditional Medicare.
Researchers added that the study also showed savings across race and ethnicity.
“Specifically, Black Medicare Advantage beneficiaries report $1,104 less in total health spending compared to [fee-for-service] Medicare beneficiaries, while Latino Medicare Advantage beneficiaries see average savings of $1,421,” a release on the study said.
The Biden administration has called on MA plans to address the social determinants of health. The latest rate notice for MA and Part D plans called for comments on potential quality measures that address social needs like food insecurity or transportation issues.
Under MA, beneficiaries use their Medicare benefit to buy a private plan. Medicare pays insurers a benchmark rate based on traditional Medicare spending in a geographic region, enabling plans to offer benefits outside of fee-for-service such as dental or vision benefits.
The analysis comes as the MA program comes under increased scrutiny from some critics and lawmakers over risk adjustment tactics such as up-coding that have led to increased spending on MA compared to traditional Medicare.
An analysis from the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment issues, found that last year Medicare paid MA plans 4% more than fee-for-service for the same beneficiaries. MedPAC has called for more forms to how CMS calculates MA benchmarks and that plan quality is not meaningfully measured.
Sen. Elizabeth Warren, D-Massachusetts, has criticized the MA program over reports that plans incentivize providers to add unnecessary diagnoses in order to inflate risk scores that lead to higher quality bonuses for payments.