CBO ESTIMATES $170 BILLION IN SAVINGS BY EQUALIZING MEDICARE ADVANTAGE PAYMENTS WITH TRADITIONAL MEDICARE FEE-FOR SERVICE
WASHINGTON, DC – On March 1, 2010, the Medicare Advisory Payment Commission (MedPAC) released its biannual report to Congress, which for the fifth consecutive year advised Congress to equalize reimbursements to Medicare Advantage plans with the traditional Medicare fee-for-service program. These recommendations were incorporated in the House-passed health care reform bill, the Affordable Health Care for America Act (H.R. 3962). According to non-partisan Congressional Budget Office (CBO) estimates, equalizing payments between Medicare Advantage programs and the traditional Medicare programs will generate $170 billion in savings over the next ten years.
"I applaud the non-partisan MedPAC report, which provides an intelligent path towards strengthening Medicare for seniors. This report is not just a debating point, but is central to protecting and preserving this important health insurance program for seniors," stated Representative Joe Courtney (D-CT). "The Trustees of Medicare have warned the country that overpayment to the Medicare Advantage program is one of the major cost drivers pushing Medicare to its 2017 negative cash flow. Following MedPAC's recommendations will extend the solvency of Medicare for all seniors and can be done in a way to allow Medicare Advantage to continue to be a choice for those who prefer it to traditional Medicare."
MedPAC's report concluded that the "Commission has consistently supported the concept of financial neutrality between payment rates for the fee-for-service program and private plans." Under the current reimbursement system, Medicare Advantage plans are reimbursed on average 14 percent more than traditional Medicare plans.
"Once again, the independent Medicare Payment Advisory Commission reports that all Medicare beneficiaries have to pay higher premiums because of the continuing over-payments to private insurance companies through the Medicare Advantage program," stated Judy Stein, Executive Director, Center for Medicare Advocacy, Inc. "The healthcare reform bills passed by both the House and the Senate, and the proposals by President Obama, would reduce this wasteful spending – saving money for Medicare beneficiaries and taxpayers alike, and extending the solvency of the Medicare program."
These extra costs are born by beneficiaries in the traditional Medicare program and all taxpayers. The report went on to conclude that the Part B premium was $3.35 per month higher in 2009 than it would have been if reimbursements were equalized.
MedPAC was established under the Balanced Budget Act of 1997 as an independent, non-partisan Congressional agency to advise Congress on issues affecting Medicare. Every year, MedPAC issues recommendations on Medicare policy changes in biannual reports to Congress.