Medicare Spending 2019 Shows CMS Spends More Per Beneficiary on Medicare Advantage

Payments to Medicare Advantage plans boosted Medicare spending in 2019 by seven billion dollars. Medicare spending per beneficiary in 2019 by the federal government was $321 more per person for Medicare Advantage beneficiaries than for those in traditional Medicare, an amount that equated to $7 billion in additional Medicare spending, according to a recent analysis from the Kaiser Family Foundation (KFF).

The increase in Medicare Advantage spending included the cost of additional benefits, such as vision, dental, and hearing coverage that are financed by rebates and not covered for beneficiaries in traditional Medicare. The added benefits have likely brought on the Medicare Advantage enrollment growth, which reached 22 million in 2019, then 26 million this year, according to the recent analysis.

Medicare Advantage spending has risen steadily, and is expected to rise to $664 billion by 2029, up from $348 billion this year. Half of the Medicare Advantage growth projections are due to growth in enrollment, while the other half can be attributed to the growth in federal payments per enrollee after accounting for inflation. The Medicare Advantage growth projections per enrollee are also driven partly by the assumption that federal bonus payments that plans receive based on their quality scores will persist to increase.

The higher payments for Medicare Advantage, for example $11,844 per person in Medicare Advantage compared to $11,523 in traditional Medicare spending in 2019, have led to higher federal spending than would have happened under traditional Medicare, and higher Medicare Part B premiums paid by all members, including those in traditional Medicare. 

The higher Medicare Advantage spending and the future of Medicare Advantage growth is attributed to features of the Medicare Advantage payment system, including how benchmarks for plan payments are set, as well as the Medicare risk adjustment process, which is specifically designed to compensate plans more appropriately for higher risk, higher cost members. The KFF analysis outlines that if Medicare Advantage spending per enrollee were 2 percent less each year than the amount expected by the Medicare actuaries, then total Medicare spending would be $82 billion lower than expected from 2021 and 2029.

On the other hand, if the Medicare Advantage growth projections in per person spending on beneficiaries in Medicare Advantage were held to the same Medicare growth projections in spending on beneficiaries in traditional Medicare, then total Medicare spending would be $183 billion lower than anticipated from 2021 to 2029, the analysis finds.

With 10,000 boomers aging into the program every day, and beneficiaries being offered a larger selection of plans each new season, Medicare Advantage growth projections and Medicare Advantage spending overall will only increase and continue to take on a larger role in Medicare spending over the next decade. This massive revenue shift could be a boom for your practice, financially astute medical groups will “follow the money.”

If your healthcare organization manages Medicare Advantage patients and you’re looking to succeed in the evolution to value-based care delivery models, ForeSee Medical is a specialized software platform for accurate Medicare risk adjustment. Through proprietary clinical algorithms and natural language processing, ForeSee Medical optimizes HCC coding, empowering providers to positively influence health outcomes.

Blog by: The ForeSee Medical Team