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Medicare Advantage and Post-Acute Care: Saving Money or Shifting Costs?

By Lane Koenig, PhD, Jing Xu, PhD and Berna Demiralp, PhD

In its April 2020 report, the Medicare Board of Trustees projects that the Hospital Insurance (HI) Trust Fund – basically, funding for Part A – will be depleted by 2026; Medicare will only be able to pay out 90 percent of benefits available under current law in that year.  With financial circumstances likely to worsen as a result of COVID-19, Congress will be looking for ways to extend the solvency of the Medicare program over the next few years.

One approach favored by some would be to accelerate the growth of Medicare Advantage (MA), which would shift financial risk from the Federal Government to the private insurers that offer an MA plan.  In 2020, approximately 36 percent of Medicare beneficiaries are enrolled in an MA plan, which receives a fixed fee per enrollee, adjusted for clinical characteristics. Most beneficiaries are in Traditional Medicare (TM), but the Medicare Trustees project MA enrollment to continue to grow and reach 43.3 percent by 2030.

Because MA plans receive fixed payments for their enrollees, they have an incentive to control healthcare use, including use of post-acute care (PAC), i.e., home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and […]

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