Why Medicare Advantage Plans Costs More
Many contend that the government “overpays” for people enrolled in private plans, since traditional Medicare could have covered these patients for less money…The government compensates insurers based on the health of their enrollees at the start of the year. Plans with healthier patients receive less money than those with sicker ones to reflect the likelihood that healthier people will use less care…But for decades, the government has failed to determine who is healthy and who is sick with any precision, with the result that private plans receive larger payments to cover their patients’ costs than necessary. This botched payment system gives insurers an incentive to spend more time selecting the healthiest patients, and less time treating them more efficiently.
Medicare forces the plans to provide more generous benefits, which only encourages more care and even higher costs. These extra benefits include dental services, vision care, hearing aids, podiatry, and other supplemental services. More than half of the Medicare Advantage plans offer some form of gym or health club membership, for example.
Source: Dana Goldman, et. al.
Very intersting article.
Health club membership? Exercise is important, but that should really be an out of pocket expense. Especially because some of the most beneficial forms of exercise (walking, etc.) are absolutely free! I’m all for preventative care, but it’s got to make sense.
“If MA organizations had more accurately projected their revenues and expenses in 2005, they would have been able to provide beneficiaries with additional benefits or cost-sharing reductions, and still maintain the level of profits projected”
It isn’t all on the government. Companies still work the system.
“But for decades, the government has failed to determine who is healthy and who is sick with any precision” This is key to lower costs, in general. This is only allowing people go see doctors for minor symptoms, and go from a common cold to a procedure that costs 5 times the treatment of a common cold. There should be a guideline to determine when a person is actually sick and deserves some serious treatment, and when their symptoms can simply be cared for with unexpensive treatments. It just blows my mind how many people actually get away with this, and they are completely clueless of the cost it implies..
Hmm…I suppose by this logic I overpaid for my education when I could have just gone to DeVry.
On second thought, I’ll stick with my overpriced degree.
I also agree with Cindy…health club memberships?!
Dr Goodman’s alternative to managed competition is a individual based insurance market with a “change of health status” insurance available. The point of this is to remove all government risk adjustment.
If we couple this with an individual mandate and government subsidies for insurance I think it could work.
So government really is behind the rising healthcare costs.
“But for decades, the government has failed to determine who is healthy and who is sick with any precision”
Probably because it requires a 20-page form that no one bothers to fill out.
The best predictor of costs in a given year is the cost of care the previous year. It is exceedingly difficult to predict this with any degree of accuracy.
Excercise can come from something as simple as jogging… Gyms are not neccessary for people to be healthy, a mindset of being healthier is. The reason most gyms dont have caps on membership sales isnt because the gyms are massive, its because the majority of the people who have them go maybe once a week.
Interesting that private insurers are being forced to pick up the tab because the government underpays.
The Trustees report would look even more like a magic show if medicare picked up coverage for everyone.