Exploring Why Medicare Advantage Plans Cost More Than Traditional Medicare

Understanding Why Medicare Advantage Plans Are Costlier

The Centers for Medicare & Medicaid Services (CMS) is set to disburse a staggering $76 billion more to Medicare Advantage (MA) plans in 2026 than it would under traditional fee-for-service Medicare. This trend is raising eyebrows and fueling debates within health policy circles. Despite introducing changes in 2024 intended to curb inflated risk assessments made by MA plans to secure higher payments, the discrepancy persists.

Andy Johnson, a principal policy analyst for the Medicare Payment Advisory Commission (MedPAC), highlighted the two main contributors to this elevated cost: “coding intensity” — the practice of patients being classified with higher risk scores, and “favorable selection,” which sees healthier, less costly enrollees gravitate towards MA plans instead of traditional options.

The Ongoing Challenge of Coding Intensity

The term “coding intensity” refers to the prevailing practice among MA plans to aggressively document health conditions, painting a picture that suggests enrollees are sicker than they truly are, which inevitably leads to increased Medicare expenditure. As Luis Serna from MedPAC stated, “MA plans have a financial incentive to document more diagnoses than providers in fee-for-service Medicare.” This results in inflated risk scores that further exacerbate the spending gap.

Recent investigations, including a significant fraud settlement involving Kaiser Permanente, spotlight this issue. They have agreed to pay $556 million to settle allegations of billing Medicare for non-existent conditions due to misplaced diagnosis codes. This settlement not only highlights the severity of the issue but also emphasizes the need for accountability within these plans.

Implications of Risk Adjustment Fraud and CMS Action

Risk adjustment within Medicare Advantage programs is vital, as it helps ensure plans catering to sicker members receive adequate compensation. However, questions persist about how risk scores are assigned. Investigations have indicated that some providers, like UnitedHealth Group, have been accused of leveraging the system to their profit by inflating the severity of diagnoses.

CMS has attempted to rectify these discrepancies with policies such as V28, which reframes how risk scores are derived. The primary objective here is clarity and precision — focusing on diagnosed conditions over projected future ones. By implementing such measures, CMS aims to mitigate the projected $76 billion expenditure significantly, a figure that corresponds to approximately $22 billion attributable solely to coding issues.

Fraudulent Practices Impacting Medicare Advantage

The consequences of false reporting and coding adjustments are not limited to wasteful government spending; they complicate patients' access to genuine healthcare services. Senator Chuck Grassley’s recent report outlined how corporations, like UnitedHealth, have exploited coding systems, resulting in gaming that compromises care quality and increases overall costs. This costs taxpayers and beneficiaries alike.

Moreover, practitioners and consulting groups can face conflicting incentives. For instance, contracts with MA plans may reward providers for highlighting diagnoses that, while profitable for the plans, may not reflect the actual health status of the patient short- or long-term.

Future Considerations for Medicare Stakeholders

As the Medicare Advantage program continues to grow, with over 34 million members currently enrolled, the stakes are higher than ever. Stakeholders including policymakers, healthcare providers, and beneficiaries must remain vigilant regarding prevention of systemic fraud and abuse. The accountability of MA plans will determine both the taxpayer burden and the integrity of Medicare as a healthcare option for seniors.

The track record of settlements and investigations indicates a pressing need for transparency and regulation going forward. Understanding the implications of these findings, especially in places like Muskegon where residents heavily rely on these plans, underpins the importance of making informed healthcare decisions.

Making Sense of Medicare Advantage Plan Choices

For those navigating their healthcare options, knowing the differences between Medicare coverage plans, including their potential benefits and drawbacks, is essential. This includes understanding the financial implications of Medicare Advantage plans versus traditional Medicare, and ensuring one’s healthcare needs are matched with the right kind of plan.

As residents of Muskegon and similar communities explore their options this year, it’s crucial to compare Medicare drug coverage, assess top-rated Medicare Advantage plans, and consult resources for free Medicare Advantage plans tailored to their needs. Such diligence not only supports informed decision-making but also contributes to overall wellbeing during healthcare's complex landscape.

Call to Action: If you or a loved one are considering options in Medicare Advantage, be proactive in comparing plans that fit your healthcare needs. Understanding your choices can lead to better health outcomes and improved financial wellbeing.