How can Medicare deliver meaningful reforms?

According to a report by the 2014 Medicare Trustee’s, enrollment in the Medicare Advantage plan has been on the rise for almost a decade. In 2005, around 5.8 million beneficiaries of Medicare were enrolled in this particular plan which comprised of 13.6% of the total number of people enrolled in the program. Today however there are almost 16.2 million Medicare beneficiaries in the Medicare Advantage plan which is around 30% of the entire program enrolment.
The debate regarding the relative efficiency of Medicare Advantage plans has often lead to confusion regarding what Medicare pays Medicare Advantage plans with whether or not the Medicare Advantage plans can provide the same level of benefits as Medicare in a less expensive manner than the traditional FFS. According to recent data which was compiled by the Medicare Payment Advisory Commission, it was confirmed that the Medicare Advantage plans in comparison to the FFS are relatively more efficient. In 2014, Medicare Advantage plans of all kinds submitted premium bids to CMS (Centers for Medicare and Medicaid Services) which were 98% of the FFS costs. If a plan has a bidding above the benchmark amount then the beneficiaries are expected to pay the additional premium amount in order to make up the difference between the two. According to the CBO (Congressional Budget Office) analysis, Medicare Advantage plan bids are likely to be 4% below the average of the FFS spending for a beneficiary in the year 2020. Thus the growing difference between FFS and the MA plan costs could result in a program wide reduction in costs which could be shared along with the beneficiaries of Medicare. More, it has been estimated also that the second lowest Medicare advantage plan bid within a region would be around 9% less than the costs of FFS. Thus the positive impact of private plans isn’t limited strictly to what is delivered to the enrollees of MA plans.
For a number of years, critics of private plan risk contracting in Medicare have put forward the argument along with evidence that the private plans have benefitted from a favorable selection along with a rudimentary risk adjustment methodology. It has also been found that with a $1 increase in the payment of Medicare to private HMO plans has caused a 49% increase to occur in plan bids in which 34% goes to beneficiaries in the form of lower cost sharing or extra benefits.
Lastly, under the current law, the premium for FFS is uniform all the time irrespective of the relative cost of FFS to the available MA plans within the region. Beneficiaries would be required to pay the entire additional premium for plans which cost more than the weighted average bid and they would be allowed to keep 100% of the savings because of their enrolment in plans having a below average premium.
Medicare advantage plans would also be expected to offer beneficiaries a plan having an actuarial value which would be equivalent to the statutory benefit. It would thus then be possible to envision bipartisan support for fair competition to exist between the FFS and the MA plans.

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