Hey, who isn’t in favor of reining in excess profits? Despite the fact it was Congress who allowed those supposed excess payments to Medicare Advantage plans, they are lambasting those plans for even thinking about raising premiums or cutting benefits when their payments from Medicare are frozen and reduced over the next several years. Congress tells them to simply become more efficient. HHS threatens them. That may play well for a nightly news sound bite, but like much of what is going on with PPACA, what you hear is not always the full story or in some cases even the truth.
It is true that Medicare pays more to MA plans than it does to fee-fore service Medicare and it is also true that Medicare beneficiaries who select a MA pay less in out of pocket costs and in many cases less in premiums than the seniors who stay enrolled in traditional Medicare. So, if you take these facts to a logical conclusion, much of the extra payment made to the Medicare Advantage plans goes directly to the beneficiaries. Now if that were not the case and it was all going into the pockets of the MA plans they would have to be really efficient already to attract and keep customers with high benefit levels, lower premiums and high profits.
In addition, some calculations show that the excess payments assumed when budgeting for PPACA were overstated and as a result the ten year savings projected may not materialize. I have not done the research myself, but the Ritter Blog has and you may want to take a look. This article also contains links to Medicare data.
As a side note, the $136 Billion in MA cuts which CBO projected as a result of ACA will never actually materialize. This is true since the “excess payment” was calculated at 14% of OM (Original Medicare) when the actual number for 2010 in the absence of the ACA legislation was really 9% (per MedPAC in March 2010). The true number should be closer to $87 Billion, leaving a 10 year shortfall of $49 Billion
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