Millions of seniors paid higher Medicare premiums last year because of overpayments to private insurers in the Medicare Advantage program.
Those overpayments increased Medicare Part B premiums by about $212 per enrollee last year, adding up to about $13.4 billion in additional premiums paid by seniors nationwide, according to a new report released March 10 by the Joint Economic Committee, a bipartisan group of lawmakers that advises Congress on financial issues.
Medicare Advantage, also known as Medicare Part C, allows private insurers such as UnitedHealth Group (NYSE:UNH), CVS Health’s (NYSE:CVS) Aetna and Blue Cross Blue Shield plans to provide Medicare coverage, the committee said. Congress originally intended for the program to cost less than traditional government-run Medicare.
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However, the committee estimates that in the last year the federal government paid Medicare Advantage insurers between $76 billion and $84 billion more than it would have cost to cover the same people under traditional fee-for-service Medicare.
Because Medicare Part B premiums cover about a quarter of the program’s total costs, higher spending directly results in higher premiums for all enrollees.
“Let’s be honest about the math: When Medicare Advantage is overpaid, that money doesn’t just disappear, it shows up in the Medicare Part B premiums seniors pay each month, including those paid by traditional Medicare beneficiaries who receive no additional benefits,” the Joint Economic Committee Chairman said. David Schweikerta Republican representative from Arizona.
The report estimates that covering a beneficiary in Medicare Advantage costs 17% to 20% more on average than covering the same person in traditional Medicare.
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Those higher premiums are reducing the amount seniors receive from Social Security. For most beneficiaries, Medicare Part B premiums are automatically deducted from their monthly Social Security payments.
The committee estimates that since 2016, Medicare Advantage overpayments have added about $82 billion to total Part B premiums. Of that amount, approximately $6 billion was paid by people enrolled in traditional Medicare who do not receive the additional benefits offered by Medicare Advantage plans.