Government has overpaid private Medicare Advantage plans by billions of dollars

Incoming House Ways and Means Subcommittee on Health Chair Pete Stark (D-Calif.) on Thursday said that the federal government has overpaid private Medicare Advantage plans by billions of dollars, the San Francisco Chronicle reports.

About 5.6 million Medicare beneficiaries are enrolled in MA plans, managed care plans that are sponsored by health insurers.

Stark based his comments on a study released on Wednesday by the Commonwealth Fund that found Medicare beneficiaries enrolled in MA plans in 2005 cost the federal government $5.2 billion, or 12.4%, more than comparable beneficiaries enrolled in the traditional fee-for-service program. Stark said that the payments to MA plans "are not a mistake."

He added, "Republicans are overpaying Medicare HMOs as part of a deliberate effort to shift beneficiaries into private plans," and their "ultimate goal is the privatization of Medicare, complete with a voucher system that leaves seniors to fend for themselves."

Health insurers, which questioned the methodology of the study, said that MA plans reduce costs through increased competition. America's Health Insurance Plans said that Medicare beneficiaries enrolled in MA plans save an average of $82 monthly compared with those enrolled in the traditional fee-for-service program, for a total savings of $6.8 billion annually.

According to the Chronicle, the comments from Stark serve as an indication of "how the relationship between many industries and Congress will change in January when Democrats assume control of both houses from Republicans" (Epstein, San Francisco Chronicle, 12/1).