- Medicare Advantage plans pay hospitals an average of 5.6% less for services than fee-for-service (FFS) Medicare, according to a new study in Health Affairs.
- Stanford University researchers looked at data from Medicare and the Health Care Cost Institute to compare prices paid by Medicare Advantage, FFS Medicare and commercial insurers in 2009 and 2012.
- When Medicare Advantage's narrower networks are not factored in to the comparison, the program paid a full 8% less than FFS Medicare, they added.
The findings were contrary to conventional wisdom, the authors said, adding the relative prices paid also varied based on the Medicare Advantage market environment, suggesting the government should take that into account in future rate adjustments.
"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 ACA, should consider the Medicare Advantage market environment more broadly, instead of just the level of FFS Medicare spending," they stated.
The authors also echoed previous studies in finding that commercial plans pay significantly more than either Medicare Advantage or FFS Medicare and that the trend is continuing upward, and this applies for nearly all types of admissions in nearly all geographic areas. As a result, the market power of those plans to impact Medicare Advantage prices poses an important matter for future research, they said.
The relative prices also matter, the researchers argued, because they tie in to the debates around the performance and value of Medicare Advantage compared to FFS Medicare.
With "virtually no systematic analysis" on the matter, it is impossible to untangle whether the lower prices of Medicare Advantage are a result of lower quantities of treatments, lower prices, or both, the authors argued.