Op-Ed: Rep. Jaime Herrera Beutler: MedPAC’s Medicare Advantage report compares apples to pickles

The Medicare Payment Advisory Commission (MedPAC) has once again come out with its annual report to Congress, and once again, it has raised alarms about the cost-effectiveness of the Medicare Advantage (MA) program. With lawmakers looking to this report for guidance, it’s crucial to take a closer look at the assumptions behind MedPAC’s conclusions. Spoiler alert: they’re wrong.

The reality is that Medicare Advantage has consistently demonstrated its value. When analyzing actual data, a recent report found that, on average, Medicare Advantage costs about 9 percent less than traditional fee-for-service (FFS) Medicare. Moreover, increased enrollment in MA from 2012 to 2021 has led to an estimated $144 billion in savings for the federal government. This not only saves taxpayer money but also reduces total Medicare spending — what is known as “spillover” savings — demonstrating that MA is, in fact, providing a more efficient alternative to FFS.

But in its March report, MedPAC claims that MA is overpaid by approximately 20 percent. It attributes this overpayment to two factors: what they call “favorable selection” and coding differences. These are flawed assumptions and since MedPAC relies on assumptions rather than data, it’s garbage in garbage out.

First, MedPAC argues that MA plans attract healthier beneficiaries than traditional FFS Medicare, a phenomenon they describe as “favorable selection,” which they claim inflates the program’s costs.

In fact, research has consistently shown that Medicare Advantage plans actually enroll a higher proportion of beneficiaries with chronic conditions and complex healthcare needs, including those who are dual-eligible for both Medicare and Medicaid. Beneficiaries in MA are often sicker and require more intensive care than their FFS counterparts. By ignoring this reality, MedPAC fails to recognize the true cost burden of serving these higher-need populations.

In addition, MedPAC’s analysis overlooks the fact that a substantial portion of Medicare beneficiaries who enroll in MA plans have no experience with FFS. These individuals are often new enrollees in the system, and MedPAC fails to account for them, instead using FFS-based assumptions that do not reflect the reality of the MA program.

MedPAC’s analysis also conveniently overlooks the fact that beneficiaries switching from FFS to MA plans may have delayed care due to the higher out-of-pocket costs associated with FFS Medicare.

Upon switching to an MA plan, these beneficiaries — who may have been putting off necessary care due to financial constraints — are likely to seek more care, thus increasing their reported healthcare spending. But this should not be viewed as an inherent flaw in the MA program — it’s a reflection of the need for more affordable and accessible healthcare options, which MA provides.

Another glaring flaw in MedPAC’s report is the failure to consider that providers are often less likely to code accurately in FFS Medicare. This coding difference is crucial in understanding the true cost structure of Medicare programs.

In MA, there are financial incentives for providers to submit accurate and detailed coding, which can make a significant difference in how healthcare costs are reported. In contrast, FFS Medicare does not always have the same incentives, leading to discrepancies in how services and costs are represented. MedPAC’s dismissal of this factor is a critical oversight that skews their comparison between FFS and MA.

Importantly, MA enrollees are more satisfied than those with FFS and research shows they have better health outcomes. This should come as no surprise since MA is a public-private partnership where MA beneficiaries enroll in private health plans to receive their benefits. In a private program, their goal is to serve you because their profits are aligned with your satisfaction. No satisfaction? No customers. It’s not the same with the government.

I know from my experience in Congress that lawmakers rely on these reports. But, in this case, they should be cautious. Instead of relying on MedPAC’s conclusions, they must consider the broader, more accurate picture of Medicare Advantage’s benefits. We need to continue supporting policies that ensure the long-term sustainability and success of the program, not undermine it based on incomplete or inaccurate assumptions.

It’s clear that MedPAC’s analysis fails to reflect the complexities of the Medicare system and the real-world impact of Medicare Advantage. The reality is that Medicare Advantage delivers more effective and efficient care for millions of Americans, and it does so while saving the government and taxpayers billions of dollars. It’s time for policymakers to recognize the value of MA and reject misleading and flawed analyses that threaten to undermine this vital program.

Jaime Herrera Beutler served six terms in Congress representing Washington’s 3rd District.