The Value of Extra Benefits Offered by Medicare Advantage Plans in 2006

The Value of Extra Benefits Offered by Medicare Advantage Plans in 2006

As Medicare Advantage enrollment continues to climb, this report prepared for the Kaiser Family Foundation compares the value of extra benefits provided by private fee-for-service and other types of Medicare Advantage plans.

As of January 2008, 8.8 million people with Medicare were enrolled in a Medicare Advantage plan, an increase of 63% since 2005. Some say the recent growth in Medicare Advantage enrollment is due to the extra benefits offered by plans, which help to reduce out-of-pocket costs for enrollees. One of the reasons plans are able to provide extra benefits is that Medicare pays plans more, on average, to provide services for enrollees than it would pay for similar beneficiaries in traditional Medicare, according to the Congressional Budget Office and the Medicare Payment Advisory Commission.

The report's analysis confirms that on average Medicare Advantage plans provided extra benefits above what traditional Medicare covers in 2006, but finds the value of extra benefits lower for private fee-for-service plans than for other Medicare Advantage plans. Private fee-for-service plans are of particular interest because they now account for more than one in five beneficiaries enrolled in a Medicare Advantage plan.

The analysis uses a model to estimate of the net value to enrollees of the benefit packages provided by different Medicare Advantage plans in 2006. Information on plan benefits came from the Medicare Compare database in September 2006, while data on Medicare utilization, unit costs, and expected cost-sharing are chiefly derived from the 2004 Medical Expenditure Panel Survey. The report was prepared for the Foundation by Mark Merlis.

Report (.pdf)