Insurers Reap Profits from Medicare Advantage Participation

According to a study by the Government Accountability Office, offerors of Medicare Advantage plans earned profits in excess of $1.1 billion more than anticipated for the year 2005. The GAO found that the increased profits occurred because the Medicare Advantage organizations spent 85.7% of their revenues on medical expenses, but the projections had assume spending of 90.2%.

The profit margin for the MA plans was 5.1%. Moreover, the study found that 2/3 of beneficiaries enrolled in MA plans were enrolled with organizations that realized larger profits than anticipated.

The report provides ammunition to those who oppose the entry of private insurers into the Medicare system.

The issue remains of whether the single year 2005 has produced skewed results with 2006 and beyond conforming more to prior projects or whether the 2005 figures presage a continuing level of corporate profits. The Center for Medicare and Medicaid Services argues that the numbers for 2006 and beyond will conform to projections. The GAO disagrees saying that it is wrong to assume that there is no relationship between the 2005 payment system and the process in the following years.

For a more in depth discussion of the GAO report and the issue, please see Inside Washington Publishers’ Inside CMS, “GAO: MA Plans Pocket $1.14 Billion Above their Projected Profits,” Vol. 11, No. 13, June 26, 2008

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.