On average, in 2019 Medicare Advantage plans spent $321 more per person than traditional Medicare, largely due to the supplemental benefits that are a trademark of Medicare Advantage.
Booming Medicare Advantage enrollment provides another reason for the increase in enrollee spending overall.
Researchers projected that this trend of Medicare Advantage spending exceeding fee-for-service Medicare spending would increase over time, as will enrollment.
By 2029, enrollment growth will have contributed $104 billion—or half—of Medicare Advantage spending.
Higher payments per enrollees will make up the other half of Medicare Advantage spending through 2029 ($105 billion).
The escalating costs per Medicare Advantage enrollee are partly due to the projected growth in rebate payments (eight percent annually, on average).
As quality bonus payments and benchmarks rise, rebates will increase as well.
Overall, Medicare Advantage outpaces traditional Medicare spending. The Medicare Advantage model has never produced savings when compared to traditional Medicare plans, the researchers stated.
However, future Medicare Advantage spending might not be as high as the projections indicate, based on certain factors.
“MedPAC recently recommended changes to how plan payments are calculated, observing that because most plans currently bid well below the cost of providing Part A and B services in traditional Medicare, there is an opportunity for the Medicare program to share in these efficiencies,” the brief explained.
If these changes went into effect, total Medicare Advantage spending might be $82 billion less than the projected $664 billion in total Medicare Advantage spending from 2022 through 2029.
Alternatively, if Medicare Advantage spending growth matched traditional Medicare growth from 2021 to 2029, then overall Medicare Advantage spending might be $183 billion lower than the projected total.
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