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The Continuing Cost of Privatization: Extra Payments to Medicare Advantage

Medicare Advantage

The Medicare Modernization Act of 2003 explicitly increased Medicare payments to private Medicare Advantage (MA) plans. As a result, every MA plan in the nation is paid more for its enrollees than they would have been expected to cost in traditional fee-for-service Medicare. The authors calculate that payments to MA plans in 2008 will be 12.4 percent greater than the corresponding costs in traditional Medicare—an average increase of $986 per MA plan enrollee, for a total of more than $8.5 billion. Over the five-year period 2004–2008, extra payments to MA plans are estimated to have totaled nearly $33 billion. Although Congress recently enacted modest reductions in MA plan payments, these changes will not take effect until 2010. Moreover, while the new legislation removes a few factors contributing to the extra payments, a number of other factors remain unaffected.


Publication Details

Publication Date: September 1, 2008
Citation: B. Biles, E. Adrion, S. Guterman, Continuing Cost of Privatization: Extra Payments to MA Plans in 2008, The Commonwealth Fund, September 2008.
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Experts

Research Associate, Center for Health Services Research and Policy at The George Washington University School of Public Health and Health Services
Professor, Department of Health Policy, George Washington University School of Public Health and Health Services
Independent Consultant