Thanks to reader Brad F for sending a link to this post from “The Incidental Economist” on what cuts to Medicare Advantage (MA) would mean to seniors.
In the post, Boston University health economist Austin Frakt summarizes an article that he co-authored for the International Journal of Heatht Care Finance and Economics
“Seniors, in general, should not be concerned,” Frakt writes. “First, only about 23% of Medicare beneficiaries are enrolled in an MA plan. Second, there will be very little loss [of services due to ] MA payment cuts.
The authors of the study analyzed what seniors might lose by looking at “consumer surplus”–the dollar value that Medicare beneficiaries receive from the benefits provided by their chosen health plan. They did this by taking a close look at the detailed choices seniors actually make and then calculating what they would be willing to pay, on average, for particular bundles of benefits.
“It turns out that the additional benefits and flexibility created by recent increases in MA payment rates simply weren’t worth very much to seniors,” Frakt writes. “Consumer surplus loss associated with cuts in payments to MA plans will be only 14 cents per dollar saved. . . the truth is that under Obama’s plan a small fraction of Medicare beneficiaries will lose their MA benefits and/or face higher costs. However, the potential savings are enormous and research shows that the benefit cuts needed to achieve them will not be terribly missed.”
Overall, then, the proposed cuts to Medicare Advantage means a Win for Seniors, a Loss for Insures.