Medicare beneficiaries may elect to receive Part A and Part B benefits through a private Part C Medicare Advantage (MA) plan, which offers coverage with an integrated benefit package similar to private insurance coverage. The share of beneficiaries enrolled in MA has grown over time, with 28.4 million (48 percent) of Medicare beneficiaries receiving benefits through an MA plan in 2022 (Freed et al., 2022).
Medicare Advantage Plans
Unlike traditional Medicare, the MA program includes private plans such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs) that can limit enrollees to a network of providers in a specific geographic area in order to offer enrollees lower premiums. MA plans may offer benefits to Medicare enrollees beyond traditional Medicare coverage, such as dental or vision coverage, and/or lower cost-sharing requirements. MA plans are required to have an out-of-pocket cap for enrollees—a benefit which is not covered under traditional Medicare. Employers and unions may sponsor MA plans for current and retired employees or members. These plans can operate under somewhat different rules, such as being permitted to restrict eligibility to employees and members and to provide customized benefits. Additionally, MA offers Medicare special needs plans, which provide coordinated care plans for individuals with specific needs, including institutionalized individuals, individuals dually eligible for Medicare and Medicaid, and individuals with specific chronic conditions.
Medicare Advantage Payments
Medicare pays MA plans a per person monthly payment adjusted to reflect the demographics and health history of enrollees. The monthly payment made to an MA plan is based on a comparison of that plan’s estimated costs of providing all Part A and Part B benefits (the plan’s bid) with the maximum amount that traditional FFS Medicare will pay for the benefits in the plan’s service area (the benchmark). Payments to MA plans are adjusted through star ratings (1–5, with 5 being the highest) to reflect a plan’s performance on quality measures. Plans receiving a star rating of 4.0 or above receive a quality bonus payment. Plans may charge added premiums for enrollment (over and above Part B premiums).
References
Freed, Meredith, Jeannie Fuglesten Biniek, Anthony Damico, and Tricia Neuman. (2022). Medicare Advantage in 2022: Enrollment Update and Key Trends. KFF. Retrieved from: https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/