Medicare Advantage Plans Costing An Extra $11.4 Billion in 2009

A new study from The Commonwealth Fund shows that it continues to cost significantly more to care for Medicare beneficiaries in private Medicare Advantage plans than in the government program:

The Medicare Modernization Act of 2003 explicitly increased Medicare payments to private Medicare Advantage (MA) plans. As a result, MA plans have, for the past six years, been paid more for their enrollees than they would be expected to cost in traditional fee-for-service Medicare. Payments to MA plans in 2009 are projected to be 13 percent greater than the corresponding costs in traditional Medicare—an average of $1,138 per MA plan enrollee, for a total of $11.4 billion. Although the extra payments are used to provide enrollees additional benefits, those benefits are not available to all beneficiaries—but they are financed by general program funds. If payments to MA plans were instead equal to the spending level under traditional Medicare, the more than $150 billion in savings over 10 years could be used to finance improved benefits for the low-income elderly and disabled, or for expanding health-insurance coverage.

I’ve discussed this problem, as well as other problems with Medicare Advantage plans in several previous posts, including here and here. If the free market solutions supported by the Republicans can really reduce health care costs, how come their market solution to Medicare costs 13 percent more than the government plan?

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3 Comments

  1. 1
    Eclectic Radical says:

    Many Republican ‘free market’ solutions are not really about the free market at all. They are about private business siphoning money from the government in return for assuming monopoly or cartel power in an area previously managed by the government.

    Civilian contractors providing functions for the military that used to be managed by the military cost more than it cost the military to do the same jobs. Private prisons cost states more than state penitentiaries. The list of examples go on.

    I won’t even touch the issue of corruption. Even though it’s a real problem, it’s not the point.

    The problem is that private corporations have to make a profit. When the government doe s a job it has to meet its operating costs. When a corporation does the same job, it has to meet and recoup its operating costs and make a profit to boot. This is always going to make privatization more expensive than bureaucracy, even if it is ‘more efficient.’ The gains from increased efficiency are lost due to the need of business to make a profit to stay in business.

  2. 2
    Ron Chusid says:

    Whether or not it is true, many conservatives do claim the market can provide services at a lower cost because the government is so inefficient.

  3. 3
    Eclectic Radical says:

    The cost of providing those services is lower… to business. The problem is that business cannot continue to fulfill those jobs and survive merely by meeting their costs. So the cost to the rest of us is unaffected at best, and often increased.

    A half-truth is a special kind of lie.

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