Rethinking Medicare Advantage Plans

One in four Medicare enrollees has chosen to join a private plan. Yet, Medicare pays 10% more to these plans, other things equal. Does that mean they are less efficient? Not necessarily, according to a NEJM Perspective by Jeet Gurum and Bob Moffit. The extra payments are the artificial consequence of a screwy bidding system. Plus they seem to produce higher quality beating traditional Medicare on 9 of 11 process measures (inputs). See the chart. So what’s the answer?

A better reform, advocated by Coulam and colleagues, would break that link: traditional Medicare would also submit bids, the government would set payment levels equal to each county’s lowest bid, and beneficiaries desiring a more expensive plan would have to pay the difference.

Under that system, traditional Medicare, no longer the default option, would compete with private plans on a level playing field. Private plans would gain substantial market share by providing Medicare coverage at the lowest cost in a county. As plans experimented with coverage models, attempting to deliver benefits in attractive, inexpensive ways, the most efficient approach in each county would be reached, and the rate of growth of Medicare spending would slow.

Comments (5)

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  1. Devon Herrick says:

    I don’t know why people have a problem with Medicare Advantage (MA) plans. MA plans are just managed care for seniors. It’s the same people who provide managed care for employee health plans. If anything, they should have a problem with traditional Medicare, which manages nothing.

  2. Joe S. says:

    Good article.

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