The Real Story on Medicare Advantage Costs and Spending

by Mary Beth Donahue

A recent Kaiser Health News article parroted a series of salacious claims on Medicare Advantage spending.

“Critics have argued for years that Medicare Advantage costs taxpayers too much,” the article reports.

Kaiser Health News goes on to uncritically quote several such opponents of Medicare Advantage who offer unsubstantiated claims like, “taxpayers pay much more for similar patients who join [Medicare Advantage] … than for those in original Medicare.”

These are serious charges. The only problem? New research, which was shared with the author of this article but curiously omitted from their coverage, says otherwise.

We’ve long known that Medicare Advantage delivers dramatically lower costs for consumers – to the tune of $1,640 a year – but a recent actuarial analysis from Milliman finds that Medicare Advantage delivers savings for the health care system, too.

Contrary to the claims of KHN’s one-sided sources, Milliman’s researchers found that total government payments to original/fee-for-service (FFS) Medicare are “slightly higher” than Medicare Advantage for beneficiaries of similar health status.

To reach these findings, Milliman applied a sensitivity analysis by adjusting FFS Medicare costs by +/-5%. Even when FFS Medicare costs are lowered by 5%, the report finds that “MA is still less expensive in total program costs than FFS.”

The report goes on to explain that “[Medicare Advantage’s] lower cost of coverage in spite of providing more benefits than FFS [original] Medicare lowers total program costs … and increases the value for every health care dollar spent by the government and the beneficiary.” 

Milliman’s findings come on the heels of a separate analysis from Health Management Associates which likewise found lower government per-beneficiary spending in Medicare Advantage than FFS Medicare

Unfortunately, this article’s distortions of the facts continued from there; casting doubt on Medicare Advantage’s risk adjustment process – the legal mechanism by which Medicare Advantage receives payment for beneficiaries’ care.

KHN’s reporting argues that average risk scores in Medicare Advantage have risen in recent years, without providing an explanation as to why.

Again, research from Milliman shows that, from 2013 to 2019 alone, enrollment in Medicare Advantage among dual-eligible beneficiaries – who often present more complex health needs and higher rates of social risk factors – increased by 125%, even as it dropped in fee-for-service Medicare.

Today, Medicare Advantage serves a greater proportion of minority and low-income beneficiaries, as well as a greater proportion of beneficiaries with three or more chronic conditions. Trends in Medicare Advantage risk scores reflect this simple reality.

The article fails to note another detail impacting Medicare Advantage risk scores: Beginning in 2019, Medicare Advantage plans were afforded new flexibilities to identify and address seniors’ social determinants of health through targeted benefits to chronically ill enrollees.

This necessarily results in additional coding as health plans work to identify these seniors and tailor benefits to their unique needs. Medicare Advantage plans are now providing expanded supplemental benefits to this patient cohort, from pest control and house cleanings to service animal support, grocery shopping, and air filtration services.

Risk adjustment is critical to Medicare Advantage’s success in identifying unmet needs, coordinating earlier interventions, and driving better health outcomes for the millions of seniors and Americans with disabilities who entrust this program with their care. This mechanism has a role to play in Medicare Advantage’s 43% lower rate of avoidable hospitalizations compared to FFS Medicare, its lower COVID-19 mortality rate, and its higher rate of vaccinations and preventive screenings.

At a time when we need to increase understanding of risk adjustment and Medicare Advantage spending, this biased reporting only added to the misinformation that faces seniors

Fortunately, no single reporter or critic has the final say when it comes to seniors’ Medicare Advantage coverage – beneficiaries and policymakers do. With a record-setting 29.5 million enrollees projected for 2022, a 98% consumer satisfaction rate, bipartisan support in Congress, and high praise from HHS Secretary Xavier Becerra, the future for Medicare Advantage remains bright.

Mary Beth Donahue is the President and CEO of Better Medicare Alliance.