By GEORGE HALVORSON
Medicare earned a very real $83.4 billion in 2022. Discounts of 17% below the average Medicare fee-for-service cost, occurring in every county for Medicare Advantage, have been very real and extremely successful in paying Medicare coverage, in a way that now turns the program into a profit center for the United States government.
You can view the actual financial report page from the 2023 Medicare Administrator’s Report below. It shows the Medicare trust fund grew in 2022 for the first time in decades. More than half of Medicare members are now enrolled in Medicare Advantage plans. Those members cost significantly less than their equivalent fee-for-service Medicare patients.
These are the actual figures from the administrator’s report.
The Medicare Administrator’s report says the total Medicare program grows per member by 6.7% each year. In that report they project that they expect that rate of increase to be constant over the next decade. Enrollees in the Medicare Part A and Part B programs have expenses that increase slightly above that figure each year. This has been true for a couple of decades.
Medicare loses money on every Part A and Part B member when spending for those programs is above the average of 6.7%.
Medicare Advantage costs for Medicare Part C are increasing at a slower rate than that number. That means Medicare makes money and creates a surplus on Medicare Advantage patients.
Medicare Advantage programs that operate like Medicare Part C now have expenses that increase, on average, about 4% each year. A 4% cost increase is a profitable figure for the Medicare program. That lower level of cost increase is very beneficial for Medicare. It helped create a profit and surplus of $83.4 billion for Medicare as a total program in 2022.
Because Medicare Advantage is a capitation program and not a fee-based payment model, capitation determines what payment levels will be. CMS has decided to set capitation increases at levels below 6.7%. We don’t need to guess about its process or number. They announced it publicly to the world at the beginning of the year.
CMS capped those per-member increases in 2024 at 4.3% for the year.
Your number guarantees that Medicare will be profitable. It also means that the trust fund is now safe from the long-term deficits and levels of financial deterioration that most Medicare policymakers have been predicting for decades for the Medicare program.
Critics of the Medicare Advantage program create some fantastic, misleading, unfounded, and flat-out wrong figures about the relative cost of Medicare Advantage in various reports that have been written about the program. Those numbers have been published in some reputable publications in ways that have confused some people trying to evaluate Medicare Advantage as a program.
Critics say the 17% fee-for-service Medicare discounts, which are clearly paid every month, are not real. Critics say the plans somehow do some kind of coding magic that they say adds 12% to the cost of Medicare Advantage members each year, rather than the lower costs that appear to exist in the offerings.
Critics and enemies of the program, without understanding how attention to cost levels actually works, completely make up and then claim that 12% of “actual costs” is the number we should use to measure the program. And they do so without measurements or supporting calculations of any kind to back up that purely opinion-based figure.
Critics attacking the program believe that figure is somehow inherently true. They use it every year without real measurements or calculations, causing people to think that what appears to be an extremely good price for Medicare Advantage plans is actually a bad and excessively high price for Medicare members, when adjusted for that price purely invented factor.
The average 17% fee-for-service Medicare discounts for Medicare Advantage plans are very real. And because they are real, the trust fund made a surplus of $83.4 billion in real and real dollars by 2022.
The $83.4 billion surplus shows that critics are using fake news. This shows that they are writing and using completely wrong numbers for their assessment of the relative costs of the programs.
Unfortunately, those critics have managed to damage the credibility of the program with these attacks. They should be completely ignored and rejected by everyone who looks at the real numbers and understands how the programs really work.
The 17% lower costs are very real.
How does Medicare Advantage offer 17% less than fee-for-service Medicare in each county?
They offer much better care.
Fee-for-service Medicare provides very poor and weak care to too many low-income members. Fortunately, two out of three very low-income members have already joined plans, but those who are not in plans receive very poor care.
Amputations are a good example.
Too many low-income Medicare patients have their legs amputated. In fact, they lose their limbs and have an extremely high mortality rate after that happens.
That generates billions in revenue for fee-for-service care programs in those communities.
That is very bad care and very expensive for too many people.
Plans are paid a capitation for each patient rather than a fee for each care.
All plans know that foot ulcers in patients cause 90% of amputations. And everyone knows that foot ulcers can be reduced by more than 60% with dry feet and clean socks for patients.
Billions of dollars are saved when plans have much lower levels of amputations, unlike the more than 20% of patients with foot ulcers and amputations described in the Shameful Metric article.
The most recent data (from the best current electronic database in care) says that plans now have about 1.3% of patients with amputations.
The plans save billions of dollars with those lower amputation rates. The plans can offer costs 17% lower than fee-for-service Medicare, because those amputations don’t happen to their members.
We need to understand what just happened with Medicare.
The plans have a five-star quality plan that focuses on issues like low blood sugar for their patients. Medicare Advantage care sites have multiple public meetings where they celebrate both the improved culture of care that results from those programs and best practices in team-based care, data-backed care, and patient-centered care that allow plans to offer a 17% less. the average fee-for-service Medicare cost.
We need to chart a future for Medicare that has much lower costs for its members and that allows us to focus on continually improving care, within the new culture and infrastructure of care that is created by turning Medicare into a profit center for the country .
That is a sure victory for the country.
It means that the much higher level of benefits that exist for Medicare Advantage members is now the new normal for the Medicare program. Medicare now pays for dental, vision, and hearing benefits, along with a wide range of home support benefits, for most members.
Some Medicare Advantage programs take the surplus they get from the 17% discounts and actually purchase Part D drug benefits for their members. Plans that choose that path provide Part D coverage for less than the cost of standard benefits, easily the smartest and most valuable use of the Medicare dollar.
People who don’t understand that most of the new benefits are basically free money for Medicare should learn and remember that the goal of the inclusion and provision of Medicare Advantage in the Affordable Care Act and Obamacare was actually to save financially and for create much better benefits for members.
Now it is a sure victory for both goals. That surplus of $83.4 billion by 2022 is a very good icing on that cake.
Critics who hate insurance companies on an ideological level still work to cut benefits. That makes absolutely no sense when you see what benefits do, who they serve, and how important they are to people’s lives.
The pressure on these points should be reduced by plans to save the trust fund.
George Halvorson is president and CEO of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002 to 2014..