Traditional Medicare rates anchor physician reimbursement in Medicare Advantage market, study finds

The rates physicians are reimbursed under traditional Medicare "act as a strong anchor" for reimbursement in the Medicare Advantage market, according to a recent study published in JAMA Internal Medicine.

Researchers led by Erin Trish, PhD, of the Los Angeles-based University of Southern California's Schaeffer Center for Health Policy and Economics, studied 144 million Medicare, Medicare Advantage and commercial insurance claims. The study authors compared reimbursement rates for 11 common medical procedures for claims filed between 2007 and 2012 in metropolitan areas.

The study found physician reimbursement under Medicare Advantage was more strongly associated to traditional Medicare rates than commercial rates, even though Medicare Advantage plans generally paid less than traditional Medicare. An office visit for an established patient resulted in a mean Medicare Advantage price 96.9 percent of traditional Medicare, the researchers found.

Overall, mean Medicare Advantage reimbursement ranged from 102.3 percent of traditional Medicare for a complex emergency department visit to 91.3 percent of traditional Medicare for cataract removal in an ambulatory surgery center. However, Medicare Advantage plans gravitated toward commercial prices for laboratory services and medical equipment claims, which were generally lower than traditional Medicare. Mean Medicare Advantage prices ranged from 75.8 percent of traditional Medicare for a complete blood cell count to 67.4 percent of traditional Medicare for a walker.

"There are a few important examples where Medicare's reimbursement formulas are outdated and private insurers have been able to negotiate lower prices than Medicare," co-author Paul Ginsburg, PhD, a professor at the USC Price School of Public Policy and director of the USC-Brookings Schaeffer Initiative on Health Policy, told USC News. "Political barriers slow down Medicare's ability to follow the private sector when markets lead to lower prices. Medicare Advantage plans have not been constrained and obtained lower prices for enrollees."

For the full study, click here.

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