Medicare Overpayments to Private Plans, 1985–2012: Shifting Seniors to Private Plans Has Already Cost Medicare US$282.6 Billion

Abstract

Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for, at most, a few years. However, no study has calculated the total overpayments to private plans since the program's inception. Prior to 2004, selective enrollment of healthier seniors was the major source of excess payments. We estimate this has added US$41 billion to Medicare's costs since 1985. Medicare adopted a risk-adjustment scheme in 2004, but this has not curbed private plans' ability to game the payment system. This has added US$122.5 billion to Medicare's costs since 2004. Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, which was mitigated, to a degree, by the subsequent Affordable Care Act. In total, we find that Medicare has overpaid private insurers by US$282.6 billion since 1985. Risk adjustment does not work in for-profit MA plans, which have a financial incentive, the data, and the ingenuity to game whatever system Medicare devises. It is time to end Medicare's costly experiment with privatization. The U.S. needs to adopt a single-payer national health insurance program with effective methods for controlling costs.

“Walking in a maze”: community providers’ difficulties coordinating health care for homeless patients

“…Dual use creates discontinuities of care and inefficiencies (such as duplication of tests and procedures), leading to increased adverse events, morbidity, and mortality [2–8]. These problems may be elevated for homeless veterans who tend to have more complex medical (including oral health) and behavioral health problems, and who may lack social support.…”

“…Medicare, Medicaid, private health insurance) [1] and many obtain care from multiple health care systems each year. While this “dual use” may allow for increased health services access and choice, it is associated with negative consequences: poor communication among providers [2], incomplete or duplicate diagnosis and treatment plans [3, 4], fragmented services, diminished continuity and coordination of care, increased emergency department and hospital utilization, adverse events [5], and increased costs [6–8]. …”

When does marketisation lead to privatisation? Profit-making in English health services after the 2012 Health and Social Care Act

“…the realisation of surpluses that can be reinvested or distributed to owners. This latter gap is surprising, not only because most large contractors are for-profit and therefore need profits to justify investments, but also because profit-making may exacerbate health inequalities (Scambler, 2009), drive up costs (Hellander et al 2013), and lead hospitals to specialise in lucrative treatments (Horwitz, 2005).…”

Back Matter

“…7. Hellander et al, 2013. States do collect back some of the money they overpaid, but never all of it.…”