Medicare Advantage pays hospitals less than traditional program: 5 findings

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Medicare Advantage plans pay less for hospital services than fee-for-service Medicare, but both pay lower rates than commercial plans, according to study in the August issue of Health Affairs.

For the study, researchers used data from Medicare and the Health Care Cost Institute to compare prices paid for hospital services by FFS Medicare, Medicare Advantage plans and commercial insurers in 2009 and 2012.

Here are five findings from the study.

1. When accounting for differences in hospital networks, geographic areas and case-mix between Medicare Advantage and FFS Medicare, MA plans paid an average of 5.6 percent less for hospital services than FFS Medicare.  

2. Medicare Advantage plans paid an average of 8 percent less than FFS Medicare when the narrower networks of MA plans weren't considered.

3. "Medicare Advantage hospital prices were lower where both the program's penetration and FFS Medicare spending were higher. This suggests that the government's ongoing efforts to adjust payments to Medicare Advantage plans, based on the Affordable Care Act, should consider the Medicare Advantage market environment more broadly, instead of just the level of FFS Medicare spending," the researchers stated.

4. Commercial plans paid more for hospital services than both MA plans and FFS Medicare. Depending on the set of DRGs used, commercial rates climbed from approximately 146 percent of FFS Medicare rates to about 165 percent, on average, from 2009 to 2012.

5. The researchers said the much higher commercial plan rates were attributable, in part, to the higher prices these plans pay for profitable service lines such as interventional cardiology and orthopedics. However, commercial plans paid higher prices than FFS Medicare for almost all types of admissions across all geographic areas.

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