Published on March 6, 2024, 12:55 am

For the second consecutive year, plans are in place by President Biden’s administration to cut payments towards Medicare’s private health plans. This decision unfolds at a time when Medicare Advantage—or the system of private, competing health plans—has over 33 million subscribers, representing more than half of the total Medicare populace. Indeed, private health schemes now form the majority portion of Medicare coverage which has been under continuous scrutiny by those against private health cover.

Critics such as Dr. Donald Berwick, former administrator for Centers for Medicare and Medicaid Services during Barack Obama’s presidency, view the rising popularity of Medicare Advantage as a threat to traditional Medicare’s sustainability. Recently, he opined that it would be better if the growth of Medicare Advantage were paused or abolished entirely.

Interestingly enough, while leading Medicare operations, Berwick commended Britain’s “single-payer” National Health Service (NHS), heralding it as a “global treasure.” Nonetheless, this “treasure” left about 7.2 million British citizens—equivalent to nearly 11% of Britain’s overall population —in waiting lists last year.

The Centers for Medicare and Medicaid Services (CMS)—the agency that oversees the function of programs like Medicare—payment rates for 2025 suggest decreases might occur shortly. The proposed alterations comprise a series of technical readjustments in several core facets of its notoriously complex payment system; these adjustments include how government’s annual “benchmark” payments to programs should be arranged and how they will balance payments considering beneficiaries’ health risks.

According to CMS forecasts, proposed amendments could increase total Medicare Advantage payment by 3.7% in 2025 compared to 2024; an increase equivalent to an additional $16 billion in revenues. According to Biden’s administration, these changes will ensure accuracy in disbursements and protect beneficiaries while also maintaining market stability.

However, when examined more closely through a comprehensive report conducted by the Berkeley Research Group, an alternate perspective emerges. According to the report–which takes into account all potential technical changes–a 1% cut in Medicare Advantage payment “per month per beneficiary” is projected for 2025.

In addition, Biden’s administration seems to be overlooking the enduring impact of inflation. Based on Berkeley Research Group’s analysis, medical costs under Medicare Advantage experienced a growth of 7.3% “per member per month” within the first nine months of 2023 and medical inflation is estimated to range between 4%-6% for 2025.

With rising medical costs and dropping Medicare payments as constant running factors, patients find themselves stuck with increased premiums, higher out-of-pocket costs or reduced access to their essential benefits and services. Patients are therefore essentially caught up in a healthcare-costly squeeze.

On the other side of this debate is the so-called Left’s game plan—to halt the growth of Medicare Advantage and transition seniors back into traditional Medicare schemes–an idea that gained popularity during Barack Obama’s presidential campaign back in 2008.

It also should not go unnoticed that numerous House Democrats and senators have co-sponsored legislation titled “Medicare for All” which aims to eliminate almost all private health plans including Medicare Advantage ones.

Despite these challenges, it is imperative to note that while Medicare Advantage has been providing affordable, high-quality care to increasing numbers of senior citizens, its payment systems require attention. They are failing due to piecemeal bureaucratic adjustments rather than structural reforms which could steer it toward long-term success. The necessary policy changes include transitioning from administrative pricing used in traditional Medicaretowards market-based bidding among health plans which guarantees government contribution reflects real market costs enhancing price competition among plans and providers. Additionally, a look-back system should be instituted replacing current prospective estimates for enrollees’ future health-related costs.

Ensuring these retrospective adjustments could stabilize the market while eliminating uncertainty about patients’ future risk and stopping any insurance company from exploiting the system at the taxpayers’ expense.

Medicare Advantage’s major success has been its significance in delivering valuable health-policy benefits for an increasing number of seniors. Nonetheless, Medicare Advantage’s luminous future is contingent on Congress implementing distinct, crafting legislative resolutions to amend features that are decidedly broken.