President’s Forum No. 151 | Authors Conclude Medicare Advantage Should be Abolished

The conclusion was based on the high cost of MA compared to traditional Medicare. For example:

Medicare Payment Advisory Commission (MedPAC), the nonpartisan agency reporting to Congress, recently estimated that MA overpayments added $82 billion to taxpayers’ costs for Medicare in 2023 and $612 billion between 2007 and 2024. Two insurer strategies drive MA overpayments: diagnosis upcoding and avoiding enrollees who are ill and do not contribute to profits.

Although MA insurers must accept all applicants in counties where they offer a plan, they are also free to withdraw from counties where they are accumulating unprofitable enrollees.

Only 2% of Fee-for-Service (FFS) Medicare expenditures go for overhead. But MA insurers incur extra expenses for television advertisements, health care network management, benefit design, executive salaries, health care utilization review, prior authorization, and shareholder profits, driving their overhead up to 14%. 

This is according to a report from Milliman, an international actuarial and consulting firm, on MA financial results for 2022. Milliman estimates applied to subsequent years’ payments, MA overhead for 2007 to 2024 totals $592 billion—equivalent to 97% of taxpayers’ $612 billion overpayments to them during that period.

The authors closed their analysis stating, “A smarter, thriftier way to expand benefits and lower out-of-pocket costs is possible for all Medicare beneficiaries, but first, we must eliminate MA and double down on traditional Medicare, covering all enrollees in an expanded and improved Medicare program. That would be a good deal for patients and taxpayers.”

The NRLN has advocated for 10 years that it is time to end taxpayer rebates to the healthcare insurance industry for MA This year rebate payments will equal 17% of every benefit dollar Medicare pays to private insurers. Private plans hold a 54% share of the Medicare market but Medicare payments per enrollee are 22% higher than we pay for Fee-for-Service (FFS) enrollee. Income taxes paid support 76% of Medicare B and D.

Yet 301 bipartisan members in Congress lobby for more rebates hoping they can eliminate the “third rail” risk and gain votes from 33 million over age 65 retirees in MA in their states. They don’t care about the other 27 million seniors back home who don’t get over $2,000 a year in rebate paid extra benefits. These 27 million are actually more in need according to MedPAC. Private plan insurers focus on enrolling younger, more healthy retirees.  

Congress’ own commission, MedPAC, produced a report and charts in 2020 showing members of Congress that 25% of the FFS beneficiaries over age 65 account for 85% of Medicare spending! MedPAC’s report states that “Costly beneficiaries tend to be those who have multiple chronic conditions, are using inpatient hospital services, are dually eligible for Medicare and Medicaid, and are in the last year of life.” 

The NRLN and most Americans support competition from private healthcare plans and the NRLN understands the financial challenges ahead for Medicare and the federal budget. However, we do not support MA taxpayer bonuses and rebate subsidies, or anti-competitive restrictions placed on original Medicare FFS just to preserve the notion that private insurance plans may be more cost effective or provide better care than FFS, when the record shows they are not. 

We have repeatedly pointed out to members of Congress that the chronic benefits provided to the 33 million enrollees in MA plans are denied to the 27 million participants in traditional Medicare. If Congress is going to continue funding MA with taxpayer money, those in traditional Medicare should receive the same benefits.

Bill Kadereit, President
National Retiree Legislative Network