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GAO-14-210R 1 (2013-12-19)

handle is hein.gao/gaobaahnc0001 and id is 1 raw text is: G A O U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 December 19, 2013 The Honorable Sander M. Levin Ranking Member Committee on Ways and Means House of Representatives Medicare Advantage: Special Needs Plans Were More Profitable, on Average, than Plans Available to All Beneficiaries in 2011 Dear Mr. Levin: In 2011, the federal government paid approximately $124 billion to Medicare Advantage (MA) organizations-entities that offer a private health plan alternative to Medicare fee-for-service (FFS). The private plans offered by MA organizations are generally available to all Medicare beneficiaries in the plans' service areas, although there are some MA plans with more specific eligibility requirements. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the establishment of special needs plans (SNP) that exclusively serve Medicare beneficiaries in one of three classes of special needs: (1) beneficiaries dually eligible for Medicaid, (2) beneficiaries with severe or disabling chronic conditions, or (3) institutionalized beneficiaries.1 As of November 2011, approximately 1.4 million beneficiaries, or about 12 percent of all beneficiaries enrolled in MA, were in SNPs. Medicare payments to SNPs tend to be higher than payments to other MA plans, in part, because the beneficiaries enrolled in SNPs are generally in poorer health and are expected to use more health services relative to enrollees in other MA plans. However, even after accounting for differences in relative health status, payments to SNPs were higher in 2011, on average, than payments to the average MA plan. The Medicare Payment Advisory Commission (MedPAC) reported in March 2011 that payments to SNPs for 2011 were projected to be, on average, 113 percent of FFS costs for a like set of beneficiaries enrolled in Medicare FFS. In contrast, the payments for all MA plans-including SNPs-were projected to be, on average, 110 percent of costs for a like set of beneficiaries enrolled in Medicare FFS. Earlier this year, you asked us to provide information on how MA organizations' self-reported actual expenses and profits compared to their projections for all MA plans, including SNPs. To address this, we examined how MA organizations' actual expenses for 2011-the most recent year for which data were available at the time of your request-compared to the organizations' projections for the same year. This information will be contained in a forthcoming report. You asked us to provide additional information about how SNPs allocated the payments they received to medical expenses, nonmedical expenses (such as marketing, sales, and administration), and profits, and how these allocations compared to those made by MA 1Pub. L. No. 108-173, § 231,117 Stat. 2066, 2207(2003) (codified at 42 U.S.C. § 1395w-21 (a)(2)(A)(ii)). GAO-14-21 OR Medicare Advantage Special Needs Plans Page 1

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