Studies Say Private Medicare Plans Have Added Costs, for Little Gain

Washington – Researchers have found there to be no evidence of improvement in care as a result of private health insurance plans which serve one fourth of all Medicare beneficiaries. These plans have actually raised the cost and bureaucratic complexity of the Medicare program.

These studies have questioned the value of some of the private plans offered for Medicare beneficiaries and taxpayers. At the pivotal time in our government when President-elected Barack Obama and the Democrats on Congress prepare to focus on the plans and consider cutting the payments allotted to them, these studies are crucial evidence.

In the last five years, the enrollment in private Medicare plans has increased by nearly double, to around 10.1 million participants.

These plans are marketed as necessary supplements, and are even available in rural areas across the nation. This means many Americans are paying for private fee for service plans that mimic the standard Medicare plan and actually do little to coordinate patient care.

On the contrary, it is theorized by analysts on the Medicare Payment Advisory Commission that these private plans have driven up the costs of benefits paid by the government. This is due to the fact that the prices paid to these companies is nearly 13% higher than what is paid out for the beneficiaries of standard Medicare.

These are not new findings, nor are the fears expressed new. The Medicare Payment Advisory Commission (an independent federal panel) has been touting concern over the disparity in these plans for years now.

Bluntly put, these higher payment amounts have given funds for what is basically a Medicare expansion benefit for Medicare Advantage participants, and it does not produce any savings for the Medicare program itself. It has increased costs that eventually trickle down to beneficiaries and all taxpayers.

The beginning theory behind the development of these private insurance supplement programs was that they would cover around 95% of the proposed cost for Medicare beneficiaries in standard traditional Medicare. This theory held that private plans would be able to better coordinate care than the traditional government bureaucracy and therefore save money by being more efficient.

Due to the fact that these private plans offer popular additional benefits such as vision care and dental care, they have been accepted en mass by the public. Congress originally increased the payments made to private providers so they would enter these markets. (Still, in the theory that they were saving more money by being efficient.)

However, the private companies have lost their incentive to be efficient. The approved payment increases have been so great the private plan providers no longer are driven to be efficient, nor to offer additional benefits.

It remains to be seen how the new Democratic administration will interpret the findings of these studies.