The Sustainability of Medicare Advantage Benchmarks: Balancing Costs and Services

By | August 7, 2023

Since its inception, more than 50 years ago, Medicare Advantage (MA) has experienced significant growth, surpassing the number of beneficiaries in traditional Medicare. This situation has sparked a debate regarding the sustainability of MA benchmarks and their impact on the Medicare Trust Fund. There are two schools of thought regarding the purpose of MA.  

The first suggests that MA can lower costs for Medicare beneficiaries by establishing a financial incentive model. This model encourages savings to pass through to care providers in a public/private partnership, increasing efficiency without compromising quality. Hence, by aligning financial incentives, MA would reduce costs and improve healthcare outcomes.  

Another viewpoint on MA highlights the importance of additional benefits required by the elderly, such as hearing, dental, wellness, and transportation services. While these services contribute to improved health and well-being, they also come at an increased cost. Recent Congresses have supported this narrative by allowing MA benchmarks to exceed traditional Medicare spending per beneficiary, acknowledging the necessity of these services for seniors. 

Consequently, this growing dichotomy necessitates a critical examination of the role of MA. Should it primarily function as a vehicle for social services and accept rising costs, or should it revert to being a cost-saving model? One potential way to strike a balance is to allow enhanced services while decreasing the benchmark, which may lead to higher member costs. Alternatively, scaling back services could occur if costs are not passed on to members. In such cases, evaluating the impact of services and determining whether they genuinely improve member outcomes is essential. Services that primarily function as recruitment tools for companies could be funded through administrative overhead rather than reimbursement from benchmark payments. 

From a broader perspective, one could view social services as part of a more comprehensive governmental approach. For instance, transportation funds within the transportation department could be allocated to support the added value delivered through MA products. This thinking requires shifting from department-based funding to a more holistic and integrated approach. And the key challenge lies not in the lack of funds but in the fragmented system and the need for a more global perspective when addressing financial support.  

Furthermore, the increasing number of Medicare members opting for MA products demonstrates their recognition of the need for and desirability of additional services. MA offers a comprehensive package of benefits designed to enhance health and wellness while delivering cost-effective care when needed. Creative solutions should be explored to address the benchmark issue, such as utilizing funds from other sectors or identifying services that do not provide substantial value. Striking a balance between fiduciary responsibility and innovative problem-solving is crucial to sustaining the MA system. 

In summary, the sustainability of Medicare Advantage benchmarks requires careful consideration of the costs and benefits associated with the program. By leveraging the efficiency and cost reduction potential of MA while at the same time, addressing the need for additional services, policymakers can find a middle ground. This change may involve adjusting benchmarks, reevaluating services, and exploring innovative funding solutions. Ultimately, striking a balance between costs and services is essential to ensuring the long-term viability of Medicare Advantage and the well-being of its beneficiaries.