The Medicare Payment Advisory Commission (MedPAC) wants to change how Medicare Advantage (MA) benchmarks are calculated due to concerns that plans have not yielded net savings for Medicare.

The recommendation, outlined in a report to Congress released Tuesday (PDF), aims to address a disparity where Medicare pays 4% more for beneficiaries enrolled in MA plans compared to similar enrollees in fee-for-service.

“Despite the apparently relative efficiency of MA, no iteration of private plan contracting has yielded net aggregate savings for Medicare,” a release on the report said.

MedPAC wants to change how the MA benchmark, which is the maximum payment amount for plans, is adjusted for geographic variation.

Currently, Medicare pays MA plans more if they cover an area with lower fee-for-service spending. This is despite most plans bidding below fee-for-service in these areas; further, “payments are 9% higher than the areas’ [fee-for-service] spending, and MA enrollment is disproportionately higher than in many other areas.”

At the same time, plans in areas where fee-for-service spending is higher offer plan bids that are lower relative to their benchmark and therefore get more rebate dollars. The rebates are the amount that equals the difference between the bid and the benchmark.

“Because the rebate dollars must be used to provide extra benefits, large rebates result in plans offering a disproportionate level of extra benefits,” the report said. “Moreover, as MA rebates increase, a smaller share of those rebates is used for cost-sharing and premium reductions—benefits that have more transparent value and provide an affordable alternative to Medigap coverage.”

MA plan bids have in general declined well below fee-for-service spending, an indicator that Medicare could see greater savings by reducing payment benchmarks, the report said.

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