The Impact of Health Reform on the Medicare Advantage Program: Realigning Payment with Performance

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The Affordable Care Act enacts a new payment system for private health plans available to Medicare beneficiaries through the Medicare Advantage (MA) program. The system, which is being phased in through 2017, aims to 1) reduce the excess payments received by private plans relative to per capita spending in traditional Medicare, and 2) reward plans that earn high performance ratings. Using 2009 data, this issue brief presents analysis of the distributional impact on MA plan payments of these new policies as if they had been fully implemented in that year. We find that, when the polices are in place, they will bring overall MA plan payments nationwide down from 114 percent to 102 percent of what spending would have been for the same enrollees if they had been enrolled in traditional Medicare. While payments will vary across the nation, high-performing MA plans stand to benefit from this new arrangement.

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