Dirty Tricks Threaten Medicare Advantage

Earlier this month, the Biden administration finalized cuts to Medicare Advantage (MA). MA is a blend of public and private healthcare plans for seniors that constitutes Medicare Part C. The increased flexibility and access to private markets has made the program surprisingly popular and efficient – contrary to its public counterparts. Instead of focusing on the massive cost overruns in the rest of Medicare, the administration seems to have unfortunately zeroed in on MA.

Unfortunately for seniors who rely on MA, the cuts will result in them paying an extra $33 per month on average, according to a Raymond James analysis. However, what is perhaps more concerning is that the impetus for this attack on the one redeemable program in Medicare comes on the heels of a severely flawed report.

Earlier in January, the Medicare Payment Advisory Commission (MedPAC) released a very under-the-radar report about MA. In its findings, the report glossed over the many positive aspects of Medicare Advantage, which include very low premiums. This was conveniently in line with the administration’s already-released plan to cut roughly $4.7 billion from Medicare Part C.

Now, a MedPAC whistleblower is raising issue with the math MedPAC used in its analysis to justify these cuts. MA and the traditional fee-for-service (FFS) Medicare have differing payment methodologies. As a result, different incentive structures exist to capture certain diagnoses. Thus, the risk scores associated with MA are inflated, while FFS risk scores are deflated. In the MedPAC study, FFS “undercoding” goes unaccounted for, while adjustments were made to come to the conclusion that MA is overfunded.

Further, there existed clear bias in analyzing favorable selection. Concerns have existed that MA skews a little more towards healthy patients and deters sicker beneficiaries. While this may be true to some degree, MedPAC overstated this issue by bizarrely declining to exclude patients with end-stage renal disease from the MA analysis. It also used a model that was not peer-reviewed to generate their findings.

It is no secret that government central planners have a distaste for MA. It is one of the few glimpses of free market economics that exist within a government-run behemoth like Medicare. There is a reason why the Biden administration wants to go after it, while simultaneously bemoaning any supposed efforts to cut Medicare. Lovers of big government don’t truly consider MA a part of Medicare because of its market dynamics.

The truth is, MA is largely successful precisely because of its incorporation of the private market. Plans are very popular and its share of the program now exceeds 50 percent. The only way to undermine its credibility at this point is to cook the books. Unfortunately, it is becoming increasingly clear that that may be exactly what occurred in MedPAC’s review of the program. Now, such tricks are being used to cut benefits and raise costs for seniors. Policymakers should take note, raise the alarm, and demand accountability.