Federal government paying insurers billions more than necessary: Kaiser

In Medicare Advantage, private insurers contract with the federal government to provide coverage to the elderly and disabled in Medicare. About one-third of all Medicare beneficiaries are enrolled in these plans, and that figure is expected to grow in the coming decade,

However, insurers are paid based on costs incurred by those in the traditional Medicare program, adjusted for factors such as age and health status.

The Kaiser Family Foundation found that seniors who enroll in Medicare Advantage typically spent $1,250 less in the year before they switched to an insurer-run plan, compared to those who remained in the traditional program, according to the report that was published Tuesday. They also used fewer health services, even if they had medical issues such as asthma, breast or prostate cancer and diabetes, than their peers in traditional Medicare.

This means that the federal government may be overestimating the expected costs of Medicare Advantage enrollees, who may be healthier than their counterparts in traditional Medicare. Adjusting the payments to more accurately reflect costs could have major implications.

"It could add up to a substantial amount of money," said Gretchen Jacobson, associate director at Kaiser's Program on Medicare Policy and co-author of the report.

The federal government has never had accurate data on Medicare Advantage enrollees' costs or use of services, Jacobson said. Insurers are required to provide this information to officials, but the data often has gaps. It's not known what happens to beneficiaries' spending after they sign up for a Medicare Advantage plan.

Medicare, which already suffers from shaky finances, covers nearly 60 million Americans and is growing by 10,000 people a day as the Baby Boomers turn 65. The trust fund for Part A, which pays for hospital and nursing home costs, will be depleted in 2026 and will then only be able to foot a share of the tab, according to the most recent trustees' report.

Medicare's future has become a central focus of the 2020 presidential campaign, with several Democratic candidates looking to expand it to younger Americans or to create a universal health care system called "Medicare for All."

The Trump administration and Republican lawmakers, meanwhile, say that such a move would jeopardize the current Medicare program.

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