Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections For 2005
Medicare Advantage organizations (MAO) offer an alternative to Medicare fee-for-service (FFS) program. Payments to MAO are, in part, based on the revenue expenditures projections prior to the start of each contract year. On average, MAO projected they would spend 87% of their 2007 revenue on medical exp., 9% on non-med. exp., and that the remaining 4% would go to profits. The accuracy of MAO projections is important because these projections also affect the extent to which MA beneficiaries receive additional benefits not provided under FFS and the amounts beneficiaries pay in cost sharing and premiums. This report focuses on how MAO 2005 actual med. exp., non-med. exp., and profits compare to projections for the same year. Illus.
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$1.14 billion difference 2,000 beneficiaries enrolled 2006 and subsequent 81 percent accuracy of projections ACRP process ACRP projections actual and projected actual expenditures actual expenses actual medical expenses administratively set rate affect Medicare payments analysis includes 120 audit benchmark beneficiaries were enrolled benefit plans offered Bid Pricing bidding process bidding system CMS commented CMS officials compared to projections differences between actual differences between projected enrolled in health equivalent to 2,000 expenses and profits forms were submitted greater than projected group health plans health benefit plans health plans includes 120 contracts Medicare Advantage months is equivalent non-medical expenses organizations are required organizations submitted outlier contracts percent of total percentage of revenue profit margin profits in 2005 profits than projected projected and actual projected medical expenses projected revenue requirements reduce beneficiaries representing about 81 revenue dedicated revenue on medical submitted in 2006 total revenue two-year look-back data two-year look-back form