**GAO-08-827R**                      Published: Jun 24, 2008. Publicly Released: Jun 25, 2008.                  

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## Highlights

Medicare Advantage (MA) organizations offer an alternative to the original Medicare fee-for-service (FFS) program. Payments to MA organizations are, in part, based on the revenue and expenditure projections MA organizations submit to the Centers for Medicare & Medicaid Services (CMS)--the agency that administers Medicare--prior to the start of each contract year. Once Medicare payments are determined, they are not modified based on differences between actual and projected expenses. In February 2008, we reported that, on average, MA organizations projected they would spend approximately 87 percent of their 2007 revenue on medical expenses, 9 percent on non-medical expenses, and that the remaining 4 percent would go to profits. The accuracy of MA organizations' projections is important because, in addition to determining Medicare payments, 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 responds to a Congressional request for additional information on the accuracy of MA organizations' projections. Specifically, this report focuses on how organizations' 2005 actual medical expenses, non-medical expenses, and profits compare to projections for the same year. A forthcoming report will provide a similar analysis of 2006 data.

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## Topics

Health Care

BeneficiariesBudget allowancesComparative analysisCost analysisCost sharing (finance)Expense allowancesExpense claimsHealth care cost controlHealth care costsHealth care programsManaged health careMedical feesMedical services ratesMedicarePaymentsProfitsProgram evaluationProjections