Health insurers are painting a misleading picture of Medicare Advantage savings, experts say
The health insurance industry is continuing its campaign to convince the public that Medicare Advantage saves taxpayers money, but experts say federal data still concludes the exact opposite — and that the program as currently designed is a drain on Medicare’s trust fund.
America’s Health Insurance Plans, the industry’s primary lobbying group, funded a new report that was conducted by actuaries at Wakely Consulting Group. AHIP claims the report proves Medicare Advantage — the controversial, private alternative to original Medicare that has become a cash cow for insurers — is “saving Americans billions of dollars every year.” The actuaries, however, never use that language in the report.
STAT spoke with several independent Medicare policy experts, all of whom said AHIP’s report was incomplete at best and refuted by other studies that analyzed the same data. Analysts also stressed the federal government certainly isn’t reaping any savings from Medicare Advantage.
“Actuaries have to be careful what they attest to,” said a former official who used to work at the Centers for Medicare and Medicaid Services and who now analyzes health care policy. The official asked not be named to talk candidly about the report. “They didn’t make the point that MA spending is less than anticipated.”
AHIP’s study is a response to the Medicare Advisory Payment Commission, or MedPAC, a group that advises Congress on the state of Medicare. MedPAC has routinely found that MA plans “have never yielded aggregate savings for the Medicare program,” the group said in its March report to Congress. Most recently, MedPAC said for every $1 the government spends on traditional Medicare, it spends $1.04 on Medicare Advantage — a margin that may seem small, but results in tens of billions of dollars in extra payments to health insurers every year.
Wakely’s actuaries did not respond to interview requests. Lynn Nonnemaker, AHIP’s vice president of Medicare policy, said the report focuses on two points that should be factored into those numbers from MedPAC: out-of-pocket caps in MA plans, and how much is really spent on people in traditional Medicare.
MA plans are required to have out-of-pocket maximums for their members. In 2019, people in MA did not have to pay more than $6,700 that year for their care — anything over that amount was covered fully by the insurance company. Traditional Medicare does not have out-of-pocket caps, although a third of people opt to buy Medigap plans that limit their expenses.
AHIP’s report contends if traditional Medicare had a cap, costs would be 3.5% higher. But that is a hypothetical and imposes something in Medicare that simply doesn’t exist.
“That’s sort of a different point than when you look at actual spending,” said Jeannie Fuglesten Biniek, a senior analyst at the Kaiser Family Foundation who studies Medicare policy. “We’re still paying Medicare Advantage plans more. Maybe you’re getting more for it, but that’s a different question.”
“That’s kind of like making a point that’s irrelevant,” the former CMS official said. “There is no out-of-pocket max in traditional Medicare, and that’s what the costs are based on.”
The other main point is Medicare spending looks a lot higher if you only look at the people who are eligible for Medicare Advantage, Nonnemaker said. There’s validity to making apples-to-apples comparisons about how much is spent on comparable people. MedPAC acknowledges it attempts to correct for this in its reports, but AHIP’s report says the group’s calculations are erroneous.
However, Fuglesten Biniek said she and colleagues at KFF attempted to solve this issue in a report last year, and still found the government spent “$321 more per person for Medicare Advantage enrollees than it would have spent for the same beneficiaries had they been covered under traditional Medicare in 2019.”
AHIP’s report comes just a few weeks before Medicare’s enrollment for 2023 plans begins; a week after Humana projected large, profitable gains in its MA membership; and a couple months after top UnitedHealth Group executives made similar claims based on a flawed, industry-funded report.
A MedPAC spokesperson said the group had no comment on AHIP’s report.
About the Author: Bob Herman, Business of Health Care Reporter
Bob is a business of health care reporter at STAT. He covers hospitals, health insurance, and other corners of the industry — with a goal of explaining and shining light on the massive amount of money flowing through the system.