Medicare Advantage Provisions In Health Care Reform Legislation

Health care reform legislation passed by Congress and signed into law by President Obama includes important provisions to reduce wasteful Medicare spending. This will strengthen the solvency of the Medicare program and reduce the rate of increase in Part B premiums for all Medicare beneficiaries. The legislation also seeks to improve the care provided to Medicare Advantage enrollees and to limit their out-of-pocket costs.

Phasing Down Medicare Advantage Overpayments

Under current law, private Medicare Advantage (MA) plans are paid on average 13 percent more per enrollee than it costs to provide comparable care in traditional Medicare. These subsidies - which cost over $11 billion in 2009 - are paid for by taxpayers and by all beneficiaries, whether or not they are enrolled in a private plan. It is estimated that every couple receiving Medicare, including the 75 percent in traditional Medicare, will pay about $90 in additional Part B premiums this year to subsidize those in the private MA plans.

Health care reform legislation will phase down subsidies for MA plans over time so that on average plans will ultimately receive payments comparable to what it would cost traditional Medicare to cover the same seniors. These savings will be used to improve Medicare for everyone by improving prescription drug coverage - closing the donut hole - and covering preventive services with no out-of-pocket costs for beneficiaries.

Limiting Out-of-Pocket Costs for Medicare Advantage Enrollees

Health care reform legislation does not eliminate Medicare Advantage plans or reduce the extra benefits they provide. It is up to each private insurer to decide what extra benefits to offer; they are required to offer all benefits covered by traditional Medicare. The health care reform legislation prohibits MA plans from charging seniors more than traditional Medicare for chemotherapy, skilled nursing facility care and renal dialysis. Decisions about limiting charges for other high-cost services can be made in the future. Often beneficiaries do not realize what their costs will be for these services until the need for them arises.

Requiring Medicare Advantage Plans to Spend on Care over Profits

Health care reform legislation requires Medicare Advantage plans to spend at least 85 percent of their revenue on senior care rather than profits or overhead. Plans that do not spend at least 85 percent of their revenue on patient care would be required to return money to the government and could be suspended or terminated from the program if their spending on patient care remains below 85 percent for two or more years.

Providing Bonus Payments to Medicare Advantage Plans

Health care reform legislation creates an incentive system to increase payments by at least five percent to plans that provide high-quality care.

Government Relations and Policy, April 2010