How will reducing subsidies to Medicare Advantage plans affect me?
The government is overpaying private insurance companies. Part of the recent rise in Medicare costs – and in premiums for seniors – stems from extra subsidies to private insurance companies. Medicare Advantage is part of the Medicare program that allows beneficiaries to receive services via private plans. Policy changes, particularly in 2003, ratcheted up payment levels to private plans. The federal government pays private insurance companies on average 14 percent more for providing coverage to Medicare Advantage beneficiaries than it would pay for the same beneficiary in the traditional Medicare program. This overpayment is as high as 20 percent in certain parts of the country.1 The overpayments do not necessarily improve quality. There is no evidence that this extra payment leads to better quality for Medicare beneficiaries.2 Insurers, not seniors or the Medicare program, determine how these overpayments are used – and this includes marketing, profits, and other administrative costs.
