As Medicare Advantage Plan Payments Are Brought in Line with Traditional Medicare, New Study Forecasts Substantial Savings, Better Care

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<p>New policies enacted as part of the Affordable Care Act will reduce costs and improve quality of care for Medicare beneficiaries, while rewarding high-performing Medicare Advantage plans, a new <a href="/publications/issue-briefs/2012/oct/impact-health-reform-medicare-advantage-program-realigning">Commonwealth Fund brief</a> shows. </p><p>According to George Washington University’s Brian Biles, M.D., and colleagues, the new reforms, which eliminate most of the overpayments to Medicare private plans relative to traditional Medicare, would have saved $12.7 billion had they been in effect in 2009, the baseline year used in the study. The new legislation also provides higher payments to plans that perform well on a set of more than 50 measures of prevention, quality of care, and customer service. </p>
<p>The Medicare Advantage program, created in 2003, allows Medicare beneficiaries to receive their benefits through private insurance plans. These plans have been more costly than traditional Medicare, however, with excess payments averaging 14 percent in 2009. The reduction in these excess payments called for in the health reform law were estimated to save $132 billion over 10 years, according to the Congressional Budget Office. </p>
<p>"Medicare Advantage has been costing the Medicare program billions of dollars every year while providing care that isn’t any better than what is offered by traditional Medicare," said The Commonwealth Fund’s Stuart Guterman, a coauthor of <a href="/publications/issue-briefs/2012/oct/impact-health-reform-medicare-advantage-program-realigning">the analysis.</a> The new changes, he says, will bring payments closer to those of traditional Medicare, while also providing financial incentives for Medicare Advantage plans to focus on providing high-quality care for enrollees. </p>