title: Variations in county-level costs between traditional medicare and medicare advantage have implications for premium support.
abstract: Concern about the future growth of Medicare spending has led some in Congress and elsewhere to promote converting Medicare to a "premium support" system. Under premium support, Medicare would provide a "defined contribution" to each Medicare beneficiary to purchase either a Medicare Advantage (MA)-type private health plan or the traditional Medicare public plan. To better understand the implications of such a shift, we compared the average costs per beneficiary of providing Medicare benefits at the county level for traditional Medicare and four types of MA plans. We found that the relative costs of Medicare Advantage and traditional Medicare varied greatly by MA plan type and by geographic location. The costs of health maintenance organization-type plans averaged 7 percent less than those of traditional Medicare, but the costs of the more loosely structured preferred provider organization and private fee-for-service plans averaged 12-18 percent more than those of traditional Medicare. In some counties MA plan costs averaged 28 percent less than costs in traditional Medicare, while in other counties MA plan costs averaged 26 percent more than traditional Medicare costs. Enactment of a Medicare premium-support proposal could trigger cost increases for beneficiaries participating in Medicare Advantage as well as those in traditional Medicare.
authors.affiliation: Brian Biles (bbiles@gwu.edu) is a professor in the Department of Health Policy at the George Washington University, in Washington, D.C.
authors.forename: Brian
authors.initials: B
authors.lastname: Biles
authors.affiliation: Giselle Casillas is a policy analyst at the Kaiser Family Foundation. At the time the research on Medicare Advantage plans reported here was conducted, she was a senior research assistant in the Department of Health Policy at the George Washington University.
authors.forename: Giselle
authors.initials: G
authors.lastname: Casillas
authors.affiliation: Stuart Guterman is vice president, Medicare and cost control at the Commonwealth Fund, in Washington.
authors.forename: Stuart
authors.initials: S
authors.lastname: Guterman
mesh_terms: D000368:Aged; D017046:Cost Savings / Q000191:economics; D017047:Cost Sharing / Q000191:economics; D003365:Costs and Cost Analysis / Q000191:economics; D018588:Fee-for-Service Plans / Q000191:economics; D017048:Health Care Costs / Q000706:statistics & numerical data*; D006279:Health Maintenance Organizations / Q000191:economics; D006801:Humans; D007341:Insurance / Q000191:economics*; D017054:Insurance, Medigap / Q000191:economics; D009111:Local Government; D008483:Medical Assistance / Q000191:economics*; D006278:Medicare / Q000191:economics*; D020398:Medicare Part C / Q000191:economics*; D011243:Preferred Provider Organizations / Q000191:economics; D014481:United States
keywords: Cost of Health Care; Managed Care - Medicare < Managed Care; Medicare