Posted on February 3, 2011 09:08
Categories: Medicare
Topics: Medicare | Seniors | Spending
On January 18, Medicare Inspector General Daniel Levinson’s office presented a report to Centers for Medicare & Medicaid Services (CMS) Administrator Donald Berwick, finding that Medicare could save up to $450 million annually through changes to Medicare Advantage (MA) payment policies. The report examines data from an audit of 50 MA plans, finding that the federal government’s policy of early payment allowed insurers to earn interest on the payments for an average of 46 days before using them to pay for services. The report found that interest earnings on prepayments totaled $450 million in 2007.
From the report:
The Centers for Medicare & Medicaid Services (CMS) finances the Medicare program through the Federal Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) trust funds. The assets of the trust funds are held in special-issue U.S. Treasury securities, which earn interest income. The Medicare Part C program offers beneficiaries managed care options through the Medicare Advantage program (formerly called Medicare+Choice), which is also financed by the Part A and Part B trust funds.
Pursuant to the Social Security Act (section 1853(a)(1)(A), 42 U.S.C. § 1395w–23(a)(1)(A)), CMS makes advance capitated payments (prepayments) to Medicare Advantage organizations (MA organizations) for each enrollee at the beginning of each month. MA organizations may invest these Medicare funds in interest-bearing instruments until the funds are needed to pay for medical and administrative services. Federal law does not currently limit the ability of MA organizations to retain as additional revenue the investment income earned on Federal funds. MA organizations must submit, on an annual basis, bid proposals containing their anticipated revenue requirements for providing medical services under each of their plans for the upcoming year.
Full Report: Rollup Review of Impact on Medicare Program for Investment Income That Medicare Advantage Organizations Earned and Retained From Medicare Funds in 2007 (PDF | 465 KB)
Department of Health and Human Services. (2011). Rollup review of impact on Medicare program for investment income that Medicare Advantage organizations earned and retained from Medicare funds in 2007.
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