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Correcting 3 Common Myths About Medicare Advantage Payments


More than 28 million seniors and people with disabilities – about 45% of those eligible – choose Medicare Advantage

Published Mar 24, 2022 • by AHIP

More than 28 million seniors and people with disabilities – about 45% of those eligible – choose Medicare Advantage (MA) because it delivers better services, better access to care, and better value.

MA enrollees have better health outcomes, and 93% of enrollees are satisfied with their coverage. MA covers more racially diverse populations than original Medicare, 57% of enrollees are women, and 40% of enrollees make less than $25,000 a year. MA achieves all this at a lower cost to taxpayers, while capping out-of-pocket costs. It’s clear why the program has such strong bipartisan support.

Yet, there are still misconceptions out there about the program. Let’s talk facts. Here is how MA is saving taxpayers money, delivering more benefits, and providing hardworking Americans with high-quality coverage.

MYTH: Taxpayers do not realize any savings from Medicare Advantage.

Not true. A recent analysis from the Medicare Payment Advisory Commission (MedPAC) shows that MA plan bids, on average, are 15% below original Medicare spending, resulting in significant savings, some of which go to MA enrollees who receive financial peace of mind not available in original Medicare, through a cap on out-of-pocket costs and benefits that original Medicare does not cover – things like dental, vision, and hearing benefits, transportation and nutrition services, and in-home support services for vulnerable members.

MedPAC estimated that in 2022, the average MA plan enrollee has access to nearly $2,000 in extra benefits – benefits that are funded by the savings MA plan efficiencies generate.

Further, comparisons of actual spending over the past decade based on data from the Medicare Trustees Report show total MA spending – even with all the extra benefits – is consistently below original Medicare spending.

MYTH: Medicare Advantage risk scores are filled with inaccuracies and are inappropriately higher than original Medicare, translating to excess payments to MA plans.

Also not true. First, using Medicare fee-for-service risk scores as a baseline is problematic because risk coding in original Medicare is known to be prone to inaccuracies and shouldn’t be used as a benchmark for MA coding.

In fact, data from beneficiary surveys shows higher rates of many chronic illnesses among MA enrollees, particularly those enrolled in special needs plans, than those in original Medicare, suggesting that higher risk scores in MA reflect the actual health status of members.

Second, in 2021, the ‘net’ improper payment rate – excluding underpayments – in MA was 3.18%, which is only about half the net improper payment rate of original Medicare (6.04%).

MYTH: There is no way to measure the quality of care in Medicare Advantage.

The federal government’s Star Ratings system is designed to do just that. The Centers for Medicare & Medicaid Services (CMS) has spent the last decade building the sophisticated Star Ratings system to evaluate and report on quality and performance of MA plans across multiple categories, including patient experience, preventive services, clinical outcomes, and plan administration.

That system captures information from patient health encounters, surveys, administrative data, and CMS surveillance of plan operations to assess, compare, and report on plan performance to inform enrollees, providers, and the public about MA plan quality. This comprehensive picture of quality offers enrollees a view into plan performance that is unavailable in original Medicare. While original Medicare has performance measurement for some types of providers, there is no assessment of quality across provider systems, leaving beneficiaries in the dark about the overall quality of care available in original Medicare.

In addition to the Star Ratings system, numerous research studies have found that MA plans deliver high quality care to enrollees. Here are just some of the findings from peer-reviewed research:

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