For a long time, we've been hearing that Medicare Advantage programs, the private insurance wing of Medicare the Bush administration costs taxpayers more than previous government Medicare.

Today, in response to a request by Rep. Pete Stark (D-Cal), the Government Accounting Office (GAO) issued a Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections for 2006. leaving little doubt. Roughly 83.3 percent of the $10 billion dollars private insurance companies received from the federal government in 2006 were spent on direct care. The rest . . .well see for yourself.

Highlights of the startling findings from the GAO:

How Medicaid Advantage (MA) works:

"Payments to MA organizations are, in part, based on the projected expenditures organizations submit in their bids for providing Medicare-covered services, as well as actual enrollment and beneficiary health status. Once Medicare payments are determined, they are not modified based on differences between actual and projected expenses.3 MA organizations are not required to submit claims data to the Centers for Medicare & Medicaid Services (CMS)--the agency that administers Medicare--but they must report actual expenditures for the year 2 years prior to the upcoming contract year."

"If MA organizations had more accurately projected their revenues and expenses in 2005, they would have been able to provide beneficiaries with additional benefits or cost-sharing reductions, and still maintain the level of profits projected."

Results:

"On average, MA organizations reported earning profits of 6.6 percent of total revenue in 2006--which was higher than their projected profits of 4.1 percent."

Official response:



"CMS stated that the finding was not relevant to assessment of the MA program"

Why?

"CMS officials stated that changes in the mix and health status of projected versus actually enrolled beneficiaries may have produced differences between actual expenditures and projections."

Results:

"MA organizations included in our analysis received $1.7 billion more in revenues than projected, based on the actual number of enrolled beneficiaries. . .increased payments were not accompanied by commensurately higher-than-projected expenses"

Says it all:

"Profits and Non-Medical Expenses Were Higher While Medical Expenses Were Lower Than Projected, on Average"

Offered under the rubric of choice, it appears as if the choices are all too clear: do you want insurance companies to earn more or less for a lot of less for people on Medicare Advantage? Or, who gets the "advantage" in Medicare Advantage?