Medicare Advantage Spending Comparisons Miss Key Costs and Benefits for Seniors, New Analysis Finds
BMA analysis identifies gaps in MedPAC methodology as Commission convenes September meeting
WASHINGTON —As the Medicare Payment Advisory Commission (MedPAC) convenes its September meeting, Better Medicare Alliance today released a new white paper examining how the commission compares federal spending in Medicare Advantage and Fee-For-Service Medicare, and why the current MedPAC methodology is fundamentally flawed and incomplete.
The paper, MedPAC’s Spending Comparison Undercounts the Value of Medicare Advantage, finds that widely cited spending comparisons do not capture the full scope of federal costs and benefits associated with the two programs, including Part D and Medicaid spending, benefits required in Medicare Advantage but not Fee-for-Service Medicare, and potential savings from preventive care and care coordination that accrue over time. The result: MedPAC reports consistently overstate the cost of Medicare Advantage to the federal government relative to Fee-for-Service Medicare.
“More than half of Medicare beneficiaries choose Medicare Advantage for comprehensive benefits, coordinated care, and greater affordability,” said Mary Beth Donahue, President and CEO of Better Medicare Alliance. “When policymakers compare Medicare Advantage and traditional Fee-for-Service Medicare, they need to fully account for that value — including the preventive care and care coordination that can help seniors stay healthier and avoid costly hospitalizations over time. Medicare policy should be based on a complete picture of what the program delivers. More accurate spending data is essential to help policymakers do their jobs.”
Among the paper’s key findings:
- The spending picture is incomplete. MedPAC focuses on Medicare Parts A and B, excluding Part D and Medicaid spending that could change the overall federal cost comparison.
- The comparison doesn’t fully account for differences in benefits. Medicare Advantage is required to cap beneficiaries’ out-of-pocket costs and commonly provides benefits not available in Fee-for-Service Medicare. MedPAC does not account for the value of those benefits or what it would cost to provide comparable protections in Fee-for-Service Medicare.
- Methodology and time horizon matter. MedPAC’s comparisons rely heavily on beneficiaries who switch between the programs and may not fully account for differences in clinical complexity. One-year analyses can also miss longer-term savings from preventive care and care management.
The paper also highlights newer evidence using CMS’s updated v28 risk adjustment model. An analysis by CMS officials estimated coding differences between Medicare Advantage and Fee-for-Service Medicare of approximately 1.5% to 2% — substantially below the roughly 10% figure that has been widely cited in the Medicare Advantage payment debate.
With more than 35 million beneficiaries enrolled in Medicare Advantage, getting these comparisons right has real consequences. As MedPAC and policymakers consider the future of the program, the paper calls for analyses that reflect the full scope of federal spending, the benefits Medicare Advantage provides, and the long-term value of coordinated, preventive care.
Read the full paper here.
Read a one-page summary here.
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Better Medicare Alliance is a community of hundreds of thousands of grassroots beneficiaries and 200+ ally organizations working to improve healthcare through a strong Medicare Advantage. Learn more at bettermedicarealliance.org.