Medicare Advantage Strategies Could Save $7B in Traditional Medicare Costs

A recent report by Berkeley Research Group, sponsored by Elevance Health, highlights potential savings of $7 billion across four service categories if Traditional Medicare adopted Medicare Advantage (MA) utilization rates and fraud prevention strategies from 2019 to 2023. The study underscores that MA plans implement protective mechanisms such as prior authorization, step therapy, fraud unit findings, and capitated rates in provider contracts to manage Medicare Parts A and B spending effectively. The report identifies significant overspending in Traditional Medicare on skin substitutes, catheters, genetic testing, and off-the-shelf orthotic braces—categories prone to fraud, waste, and abuse as highlighted by the Department of Health and Human Services (HHS) Office of Inspector General. For example, Traditional Medicare spent between 1.5 to 6.5 times more on skin substitutes than MA plans, amounting to over $5.6 billion and representing the highest potential savings area. Catheter use in Traditional Medicare surged by 88% from 2021 to 2022 compared to a modest 3% increase in MA, indicating potential savings exceeding $500 million if MA utilization patterns were adopted. Similarly, the report notes more stringent MA oversight on certain high-cost genetic tests, such as CPT 81408, used for diagnosing rare childhood diseases. Strengthened coverage guidance subsequently brought Traditional Medicare utilization in line with MA levels. Off-the-shelf orthotic braces also show marked disparity, with Traditional Medicare exhibiting 25% to 30% higher use per 1,000 enrollees than MA, corresponding to an estimated savings of nearly $400 million. This suggests that MA plans' cost controls through negotiated coverage policies and fraud detection mechanisms contribute significantly to lower expenditures. The Berkeley Research Group analyzed comprehensive Medicare fee-for-service claims and MA encounter data to compare utilization and spending patterns. Their findings emphasize the impact of managed care strategies employed by MA plans in controlling costs and reducing fraud, waste, and abuse in Medicare spending. This analysis offers insights relevant for policymakers, payers, and providers aiming to improve Medicare program efficiency. Implementing enhanced utilization management and fraud prevention protocols similar to those in MA could optimize cost containment efforts in Traditional Medicare.