Researcher thinks Medicare Advantage pays too much

Kaiser Health News published an article about a researcher finding that private companies are charging Medicare Advantage too much. Medicare Advantage is an innovation that The Centers for Medicare & Medicaid Services (CMS) has been trying out where it pays private insurance companies to insure the care of individuals. In theory, if the private insurers manage the cost of individuals' care more efficiently than Medicare, the private insurers can keep the savings. However, if the private insurers are less efficient, they could lose money. However, some patients are sicker than others, and will therefore need more services. CMS tries to adjust for this by allowing the private insurers to report a risk score, which affects the reimbursement for such patients. Although CMS spells out guidelines for calculating the risk score, the researcher featured in the article believes that private insurers are reporting patients to be sicker than they actually are, costing CMS more than $106 billion from 2010 through 2019.

It's not difficult to imagine that allowing the private insurers to determine the patient risk score is a recipe for higher risk scores (given that the private insurers will get paid more). CMS apparently handles this through audits, but perhaps the frequency and magnitude of the audits are not adequate. It seems like CMS should also be able to study patients that have left Medicare and joined Medicare Advantage to see if a disproportionate number of them end up with a higher risk score compared to patients that have remained on Medicare.

In any case, it seems beneficial for society that CMS has released the relevant data. It remains to be seen whether this research will prompt meaningful change.