Calculating Medicare Advantage/Fee-For-Service Price Differences Is Harder Than It Looks

Understanding whether fee-for-service (FFS) Medicare and Medicare Advantage (MA) plans pay different prices is important — but more difficult to determine than it seems. In “Medicare Advantage Plans Pay Hospitals Less Than Traditional Medicare Pays,” we reported that MA plans paid hospitals 8 percent less, on average, than did FFS for a standard basket of hospital services. Our colleagues at the Medicare Payment Advisory Commission (MedPAC) have since alerted us that we did not account for differences in the way that hospitals receive Indirect Medical Education (IME) payments for MA, as compared to FFS, beneficiaries. In this post, we investigate the extent to which these differences affect our key result. The Problem The fundamental problem is that payments to hospitals from FFS have IME included in them, but payments from MA plans do not. According to MedPAC, for each MA admission, CMS makes an IME payment directly to the hospital equal to what would have been included in the payment for the admission had it been for a FFS rather than an MA beneficiary. These IME payments for MA admissions are over and above whatever payments are made by the beneficiaries’ MA plans and the beneficiaries themselves. The Centers for Medicare and Medicaid Services (CMS) calculates the IME payments for MA admissions based on claims that hospitals are required to submit to CMS. These claims are sometimes called dummy or “no pay” claims, because they are separate from and in addit...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Featured Medicare Payment Policy fee-for-service Medicare Advantage Source Type: blogs