Medicare Advantage Plans

One in four Medicare beneficiaries belongs. How much will scheduled changes in payment affect future enrollment?

One in four enrollees in Medicare, the federal health insurance plan for the elderly and disabled, receive their benefits through private health plans called “Medicare Advantage” plans. These plans have become increasingly popular in recent years because they offer features generally not available in traditional Medicare, such as additional benefits, lower premiums and reduced cost sharing.

However, Medicare Advantage plans also cost the federal government about 10 percent more than the traditional Medicare fee-for-service program. This is a primary reason why the Medicare Advantage program was targeted for cost reductions in the Affordable Care Act of 2010.

Under the law, federal payments to Medicare Advantage plans are to decrease over time, bringing them closer to parity with traditional Medicare program costs. The Congressional Budget Office estimated that this change will cause enrollment in Medicare Advantage plans to drop to 9.1 million in 2019 from its previous estimate of 13.9 million enrollees that year.

This Health Policy Brief examines the changes in Medicare Advantage plans mandated by health care reform, and issues that may emerge from ongoing legislative and legal challenges, and was published online on June 15, 2011 in Health Affairs.