Private Plan Overpayments Weaken Medicare’s Financing and Hasten the Program’s Insolvency

Publication Date: April 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Edwin Park; Robert Greenstein

Research Area: Health

Keywords: Economic projections; Health insurance; Health care costs; Senior citizen

Type: Report

Abstract:

Both the Medicare Payment Advisory Commission (MedPAC) — Congress’ expert advisory body on Medicare payments — and the Congressional Budget Office have determined that, on average, the federal government is paying the private plans 12 percent more than it costs to treat comparable beneficiaries through traditional Medicare. MedPAC has called on Congress to rein in these excessive payments to private plans and has recommended specific reforms. CBO estimates that the largest of these reforms — MedPAC’s proposal to “level the playing field” so private plans essentially are paid the same amounts that it would cost to treat the same patients under regular Medicare — would alone save $54 billion over five years and $149.1 billion over ten years.