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OIG: Medicare Advantage Prepayments Cost CMS Millions

Cheryl Clark, for HealthLeaders Media, January 24, 2011

If the plans did increase their bid proposals, this "could result in a possible decrease in our estimated cost savings. However, this could provide greater transparency for program officials," the OIG report said.

The OIG's renewed recommendations say that CMS should "consider the impact of the investment income earned on Medicare funds, and review our conclusions and recommendations to improve the economy and efficiency of the Medicare Advantage program."

The OIG recommended that CMS:

• Pursue legislation to adjust the timing of Medicare's prepayments to Medicare advantage organizations to account for the time that these organizations invest Medicare funds before paying providers for medical services, or

• Develop and implement regulations that require Medicare Advantage organizations to reduce their revenue requirements in their bid proposals to account for anticipated investment income.

In a 2000 report, the OIG found more than $100 million in investment income that Medicare+Choice organizations earned on payments of approximately $20 billion in calendar year 1996.

It has recommended that Medicare Advantage plans should be treated the same in terms of payment timing as the Federal Employees Health Benefits Program. Not only do FEHB carriers have more limited opportunities to generate investment income than do Medicare Advantage plans, federal regulations require that those funds be set aside in reserves "for use in the operation of the FEHB program."

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1 comments on "OIG: Medicare Advantage Prepayments Cost CMS Millions"


Don Grunt (1/29/2011 at 11:14 PM)
My question for the OIG is how come plans are waiting 46 days to pay for medical services when they are supposed to pay claims within 30 days? The biggest impact of this change would be to lengthen the time that it takes plans to pay claims to providers. That would make Medicare Advantage less popular when you consider that CMS will probably very slow with their payments to MA plans.