Are Savings Baked Into Medicare Advantage?

Medicare Advantage plans spend less for their members’ care than traditional Medicare – even when beneficiaries switch from traditional Medicare to a Medicare Advantage plan.

This spending trend, moreover, applies to all types of Medicare beneficiaries, even after risk adjustment, regardless of age, gender, or dual-eligibility.  It even applies to beneficiaries with chronic medical conditions, according to a recent study.

Why the difference?  The study’s authors suggest “favorable self-selection.”  Past studies have suggested that Medicare Advantage plans’ care management components are responsible for reduced costs but this study casts that theory in doubt.  Another theory is that the provider networks and utilization management aspects of Medicare Advantage may be more appealing to individuals who are not significant consumers of medical care.

Another issue the study raises:  with Medicare Advantage rates based on traditional Medicare spending and this new evidence that Medicare Advantage spends less on its members than traditional Medicare, it is possible that the federal government has been significantly overpaying Medicare Advantage plans for years.

Learn more in the Kaiser Family Foundation study “Do People Who Sign Up for Medicare Advantage Plans Have Lower Medicare Spending?”