Why Are Payments to Medicare Advantage Plans Being Reduced?
Medicare Advantage (MA) plans, private plan alternatives to traditional Medicare, will likely undergo a lot of changes in the near future. Medicare Advantage plans were originally intended as a way to lower Medicare costs. Through competition, flexible design, care coordination and other innovations, they were expected to save an average of 5 percent for each person enrolled.1 As the program evolved, however, the governments payment rules were relaxed, these private plans ended up getting paid too much. Today, MA plans actually cost an average of 9-13 percent more per beneficiary than traditional Medicare spends.2 The overpayments average more than $1,100 for each beneficiary enrolled in a private plan.3 Instead of saving Medicare money, overpayments to the MA plans advance the day when Medicares Part A (hospital) Trust Fund is predicted to be insolvent (in 17 months).4 In addition, the overpayments raise the cost of the Part B premiums paid by all enrollees.5 With or without comprehen
