Study: Private insurers cost Medicare big bucks

Monday, May 31, 2004

June 1, 2004

CHICAGO - If HME providers are singing the blues because of competitive bidding and other reimbursement cuts mandated by the Medicare Modernization Act, managed care companies must be whistling Dixie.
An analysis of government data by the Commonwealth Fund found that payments to private plans in 2004 will average 8.4% higher than the cost of Medicare fee-for-service. That comes out to $552 more per recipient.
MMA supporters backed the higher payments as a way to entice private payers back into the Medicare program. The Commonwealth study, however, suggests that the government may be better than private insurers at managing health care costs for the elderly, according to Reuters.
Over the past few years, private insurers have retreated from the Medicare program, complaining that payment rates don’t keep up with medical inflation. Today just 5 million Medicare members, or about 12% of the population, choose the private plans. Between 1998 and 2000, the plans insured about 16% of the Medicare population.
Under the MMA, which passed in December, private Medicare insurers will cost the government $2.75 billion more this year than traditional fee-for-service, according to the Commonwealth Fund’s study.