Medicare Advantage has serious problems, according to a bipartisan group of lawmakers who aim to improve, not dismantle, the wildly popular alternative to traditional Medicare coverage.

House members from both parties expressed frustration about the Advantage program, also called Medicare C, in a July 22 hearing of the House Ways and Means Subcommittee.

They decried what they saw as the unfulfilled promise of a program intended to provide holistic care but that has become better known for prior authorization denials, payment delays, and runaway costs.

“We’re spending $5 trillion as a country,” subcommittee Chairman Rep. Vern Buchanan (R-Fla.) said. “It seems like we’re getting sicker, and we’re spending a lot more money.”

“We are all concerned with wasteful overpayments and assuring the long-term promise of Medicare for future generations,” ranking member Rep. Lloyd Doggett (D-Texas) said.

Doggett cited data showing that taxpayers this year will pay $84 billion more to cover beneficiaries enrolled in Medicare Advantage than they would have paid had they enrolled in traditional Medicare.

“Every single Medicaid enrollee is paying an average of $198 more in Part B premiums this year because of overpayments to [Medicare Advantage] insurers,” Doggett said.

Witnesses said the problem boils down to perverse incentives baked into the Medicare Advantage program that spur insurance companies to market aggressively, inflate patient diagnoses, and deny or delay payments to providers.

Traditional Versus Advantage Plans

Enrollees in Medicare Part B have a choice between traditional Medicare and Medicare Advantage.

Both options require a Part B premium, which is paid to Medicare.

Traditional Medicare beneficiaries can then sign up for prescription drug coverage under Part D and can purchase Medicare Supplemental Insurance to cover things that Medicare doesn’t.

Advantage plans are operated by insurance companies and, from the patient’s point of view, can seem more like commercial health insurance.

These companies provide all Medicare Part A and B covered services and may include drug coverage, too. Some offer extras such as eyeglasses, hearing aids, and even gym memberships. Also, Advantage plans are required to have an annual out-of-pocket limit, which traditional Medicare does not have.

Some Advantage plans require an additional premium, but many do not.

Enrollment in Medicare Advantage has soared in recent years. In 2019, about 23 million people were enrolled in Advantage plans. Today, more than 35 million are enrolled, more than half of all Medicare beneficiaries.

Problems

The idea behind Medicare Advantage was to incentivize organizations to help people live healthier lives at a lower cost, according to Rep. David Schweikert (R-Ariz.), chairman of the full oversight subcommittee.

“[Medicare Advantage] was going to come in at 95 percent of fee for service,” Schweikert said. “[Now] our baseline obligation looks like it’s $16 trillion over the next 10 years.”

Schweikert and others expressed concern over the long-term solvency of the entire Medicare program.

One problem is the way Medicare Advantage pays for health care.

Traditional Medicare is a fee-for-service model in which Medicare pays providers directly for services.

In Medicare Advantage, an insurance company is given a fee to cover all necessary covered care for a beneficiary.

To determine the fee, Medicare assesses the financial risk to the insurer of caring for individual beneficiaries, according to Matthew Fiedler, senior fellow at the Economic Studies Center on Health Policy at the Brookings Institution. The sicker the patient is, the higher the fee.

That provides an incentive for insurers to push for additional diagnoses to be added to the patient’s chart, even if the patient is not seeking treatment for them.

That makes Medicare Advantage enrollees “look more costly than they actually are,” Fiedler said.

That’s one reason the government pays 20 percent more for care of Medicare Advantage patients, on average, than for those in traditional Medicare, where providers are paid only for services actually rendered.

Doggett also said that there is a problem with the processing of data and prior authorization requests.

“For years, I’ve heard from hospitals, home health care providers, and other professionals who are experiencing increasing administrative burdens, delays in reimbursement, and smaller payments that are falling below what traditional Medicare would have paid,” Doggett said.

Patients have been getting caught up in the denial drama as well.

“We have seen [Medicare Advantage] plans ... penalize both patients and hospitals by refusing to pay for any readmissions within 30 days, even if totally unrelated to the initial episode,” Dr. David Basel, a vice president at Avera Health, told the subcommittee.

This can be especially hard on rural hospitals, which may not have a single staff member who specializes in insurers’ rules for utilization and clinical documentation, Basel said.

Partial Solutions

Lawmakers from both parties emphasized the need to make the program more cost-efficient and effective rather than dismantle it.

Schweikert said he supports managed care as long as the incentives lead companies to profit by making people healthier as opposed to making more by denying care.

“Ninety-five percent of [Medicare Advantage] beneficiaries are satisfied with the care they receive,” Buchanan said, but he added, “It’s important to examine the program to ensure [it] continues to deliver for patients.”

Doggett has introduced two bills to correct deficiencies in the Advantage payment system.

The Fair Pay Act is a bipartisan bill that would ensure that Medicare Advantage companies pay providers at least as much for covered items and services as does traditional Medicare. The bill also sets guidelines for prompt payments to providers.

The Guard Veterans Health Care Act, cosponsored by Schweikert, aims to close a loophole that allows Medicare Advantage plans to receive fees for veterans who receive most or all of their care through the Department of Veterans Affairs.

That causes the government to pay for the same care twice, which is estimated to cost more than $350 billion over the next decade, Doggett said.