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Paying Medicare Advantage Plans by Competitive Bidding: How Much Competition Is There?

In 2009 alone, private health plans that enroll Medicare beneficiaries—known as Medicare Advantage (MA) plans—are being paid $11 billion more than it would cost to cover these beneficiaries in regular fee-for-service Medicare. To generate Medicare savings for offsetting the costs of health reform, the Obama Administration has proposed eliminating these extra payments to private insurers and instituting a competitive bidding system that pays these plans based on the bids they submit. This new Commonwealth Fund study questions the degree to which firms offering MA plans actually face competition in their local markets.

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