Overview of Medicare Advantage Plans
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 21.3 million (35.6 percent) of Medicare beneficiaries receiving benefits through an MA plan in 2018.
Unlike traditional Medicare, MA plans include networks that limit enrollees to a set of providers in a specific geographic area in order to offer enrollees lower premiums, and they can include managed care mechanisms. MA plans may offer benefits to Medicare enrollees beyond traditional Medicare coverage, such as dental or vision coverage, and/or lower cost-sharing requirements. 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
MA plans receive a per person monthly payment adjusted to reflect the demographics and health history of enrollees. The amount paid to MA plans is not adjusted by the volume of services that an enrollee uses, but MA may pay providers on an FFS basis. 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). If the plan bid is lower than the benchmark, plans receive a portion of that difference in a rebate that must be passed on to beneficiaries, either through additional benefits, lower cost-sharing requirements, or a lower monthly premium. If the plan bid is greater than the benchmark, enrollees in that plan must pay an additional premium amount equal to the difference between the bid and the benchmark. The MA benchmark is set between 95 percent and 115 percent of FFS Medicare costs, depending on whether the plan is located in a high-cost or low cost FFS area. 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.