Overpaying the insurance companies that serve some Medicare beneficiaries through the Medicare Advantage (MA) program is not a targeted, effective way to help low-income beneficiaries with their out-of-pocket costs, the Medicare Payment Advisory Commission’s (MedPAC) latest report to Congress explains.
Insurers have long defended the overpayments as helping low-income beneficiaries and have claimed that repealing or scaling back health reform’s MA savings is necessary to protect such beneficiaries from benefit cuts. But as we’ve explained, recent research shows that before health reform, insurers didn’t pass on most of the overpayments to enrollees in the form of better benefits. And MedPAC’s report reiterates its longstanding position that higher MA “payments are not a direct or efficient way to target assistance to low-income beneficiaries.”
That’s because, as MedPAC puts it, “higher MA payments and extra benefits financed by those payments do not go only to low-income beneficiaries. Rather, all enrollees in a given MA plan receive the same extra benefits, low-income or not.” Insurers’ own data show that 59 percent of MA enrollees had incomes over $20,000 in 2011.
The Government Accountability Office similarly concluded in 2008 that “if the policy objective is to subsidize health care costs of low-income Medicare beneficiaries, it may be more efficient to directly target subsidies to a defined low-income population than to subsidize premiums and cost-sharing for all [Medicare Advantage] beneficiaries, including those who are well off.”
A direct and efficient way to help Medicare beneficiaries with limited incomes, according to MedPAC, is to expand the Medicare Savings Programs, through which Medicaid helps low-income beneficiaries cover their premiums and/or cost-sharing charges.