OIG: Medicare Advantage Prepayments Cost CMS Millions
The OIG report says it disagrees with CMS' contention that Medicare Advantage plans would simply raise rates to compensate for loss of investment income for the following reasons:
• Medicare Advantage payments are being decreased under the Health Care and Education Reconciliation Act of 2010. "This modification, coupled with the provision to restrict the total amount of administrative costs reimbursed by CMS to Medicare Advantage organizations...may discourage Medicare Advantage organizations from increasing future bid proposals to recoup investment income that they would lose."
• Market competition would create a disincentive for these plans to raise their bids.
• The Medicare trust funds, through long-term investments, yield higher returns than what Medicare Advantage organizations earn with short-term investments. "Thus, any decrease in the estimated cost savings caused by increases in Medicare Advantage organizations' bid proposals would be reduced because of the difference between the higher interest earned by the Medicare trust fund and the lower interest earned by the Medicare Advantage organizations."
Cheryl Clark is senior quality editor and California correspondent for HealthLeaders Media. She is a member of the Association of Health Care Journalists.
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