WASHINGTON – Medicare failed to save as much as $450 million in 2007 because it pre-pays private insurers led by UnitedHealth Group Inc. to administer benefits, according to a U.S. government report.
The national health program for the elderly and disabled “loses potential cost savings” by making payments sooner and should ask Congress to change the system or require insurers to account for interest income when they bid to participate, Medicare Inspector General Daniel Levinson said Wednesday.
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Medicare’s administrator, Donald Berwick, rejected the recommendations Wednesday in Levinson’s report. Changing payments would cause Medicare Advantage plans to increase their bids to make up for lost investment income, Berwick wrote in a memo.
“We feel that the report overstates the significance of this issue since the true savings would be a fraction of the amount cited,” Berwick wrote.
About 11 million people were enrolled in private Medicare Advantage plans instead of traditional Medicare in 2010, according to the nonprofit Kaiser Family Foundation of Menlo Park, Calif.
Enrollment in the plans has increased to about 24 percent of Medicare’s population, up from 13 percent in 2003, when a Republican-controlled Congress created a drug benefit in Medicare run by private insurers led by UnitedHealth and pharmacy benefit managers led by Woonsocket-based CVS Caremark Corp.
UnitedHealth, based in Minnetonka, Minnesota, and Louisville, Ky.-based Humana Inc. led health plans in Medicare Advantage enrollment, according to the Kaiser Family Foundation.
Overpayment Concerns
Democrats have complained that the plans are paid more per patient than traditional Medicare costs. The health-care overhaul will cut $136 billion from the Medicare Advantage program through 2019.
Medicare Advantage plans earned interest on the government payments for about 46 days before they paid for customers’ medical care, according to the report. The interest totaled about $450 million based on U.S. audits of 50 plans. The inspector general didn’t identify the plans.
Levinson recommended that the Center for Medicare and Medicaid Services, which runs Medicare, either ask Congress to limit how long insurers are able to invest the money or require the plans to report interest income when they compete each year to participate in Medicare Advantage.
Changes under the health-care law and competition among plans “may discourage” them from raising their bids, Levinson said.
