Journal Article

Medicare Advantage Plans Pay Hospitals Less Than Traditional Medicare Pays

Bundorf, M Kate, Baker, Laurence C, Devlin, Aileen M, Kessler, Daniel P

2016

Overview

There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

• Publisher: The People to People Health Foundation, Inc., Project HOPE
• Subject: Accounting / Advantages / Baskets / Beneficiaries / Bone surgery / Budgets / Capitation / Cost control / Government programs / Health care expenditures / Health care policy / Health insurance / Health maintenance organizations / Health services / HMOs / Hospitalization / Hospitals / Hypotheses / Internet / Law schools / Medical research / Medicare / Medicare Prescription Drug Improvement & Modernization Act 2003-US / Metropolitan areas / Networks / Prices / Pricing / Reimbursement / Researchers / Services / Social programs