• Reader Correction – Why are we cutting Medicare Advantage?

    I opened my email today and found a very nice message from Austin Frakt.  You may remember him from my discussion of his work in my last post on Medicare Advantage.  He writes:

    Anyway, I agree with your position w.r.t. MA (or what I’ve read of it). But one thing you wrote isn’t quite right. You wrote “So for every dollar we give extra to Medicare Advantage companies, they pocket 86% of it; only 14% goes to actual care.” This is an aggressive way to put it and I wouldn’t say it that way (and didn’t). The more accurate way to put this is that some of the dollar goes to provision of benefits, as opposed to profit (I can’t say how much), but beneficiaries only value it at 14 cents. That is, they would be indifferent to the choice between the benefits and 14 cents cash. See my most recent post on this: https://theincidentaleconomist.com/ma-cuts-now-with-economic-wonkery/

    He’s right; in my exuberance I likely went a bit too far.  They don’t “pocket” 86 cents out of every dollar.  I didn’t mean to say they do.  I meant to say, as Austin points out, that only 14 cents of benefits come out of every extra dollar that goes in.

    It’s a good lesson in choosing my words correctly, and I appreciate the input!

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