Health Affairs

Medicare Advantage Plans and The Affordable Care Act

Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation describes the provision in the Affordable Care Act of 2010 that will gradually reduce federal payments to the Medicare Advantage program.

Roughly one in four of the nation’s 47 million Medicare beneficiaries currently participate in Medicare Advantage. These are private health plans that are paid a fixed monthly amount by the government to administer Medicare benefits to enrollees. Because Medicare Advantage programs currently cost the federal government about 10 percent more than the traditional Medicare fee-for-service program, the Affordable Care Act has outlined cost reductions to make the programs ”financially neutral.” Because of these reductions, the Congressional Budget Office predicts the number of enrollees will decline to 9.1 million by 2019 as fewer plans choose to participate.

This policy brief explains how Medicare Advantage plans work, how they are different from traditional “fee-for-service” Medicare, ways in which the plans will change, and the debate over the possible effects on the plans. Among the changes in store are the following:

Revised payment: Beginning in 2012, there will be phased-in reductions in payments to providers of Medicare Advantage plans. The size of the reductions will vary by geographic location, in keeping with the geographic differences already inherent in the traditional Medicare program.

 

Quality bonus payments: Since 2008, the Centers for Medicare and Medicaid Services (CMS) has assigned plans a rating of from one star (low) to five stars (high) based on their performance on certain quality measures. Beginning in 2012, CMS will test a method for paying bonuses to plans that receive three to five stars.

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org. You can also find the journal on Facebook and Twitter and download Narrative Matters on iTunes. Address inquiries to Sue Ducat at (301) 841-9962 or sducat@projecthope.org