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February 24, 2014 – The Affordable Care Act (ACA) is reining in overpayments to private Medicare Advantage (MA) plans by bringing MA payments closer to what traditional Medicare spends on a given beneficiary. The insurance industry and some legislators suggest that these overpayment reductions are harmful "cuts" to Medicare. This is not true.

"Private Medicare Advantage plans simply should not receive higher pay than traditional Medicare," says Center for Medicare Advocacy Executive Director Judith Stein. "It isn’t fiscally sound or fair to taxpayers. Further, despite these extra payments, beneficiaries in private MA plans, especially those with health concerns, often receive less coverage and have fewer care options than they would in traditional Medicare."

The Affordable Care Act's Medicare Advantage payment adjustments should continue to ensure more parity between private MA plans and traditional Medicare. According to research at George Washington University, in 2009 per-enrollee payments were, on average, 13% higher for MA plans than for traditional Medicare; a total of $12.7 billion in overpayments in 2009 alone. The ACA changes will bring that difference down to 1% by 2017. Yet even then, many private MA plans will be paid more than comparable care would cost in traditional Medicare.

Fortunately, Medicare’s overall costs have grown more slowly than expected in recent years. Thus payment increases to MA plans should also slow, to reflect actual costs. Private insurers that choose to offer Medicare plans should not be insulated from market forces that are reducing the rate of growth of Medicare and health care costs.

Says Center for Medicare Advocacy Policy Attorney David Lipschutz: "If overall Medicare costs continue to grow more slowly than expected, which is good news for Medicare and the federal budget, MA payments should be adjusted accordingly. We shouldn’t blindly increase MA payments or keep them level at the same time overall Medicare costs are decreasing."

Finally, despite insurance industry protestations, reducing wasteful overpayments to Medicare Advantage plans is not driving beneficiaries away from them. According to the Congressional Budget Office, MA plan enrollment is projected to grow in the coming years, from 13 million in 2013 to 18 million by 2019.

To speak with a representative at the Center for Medicare Advocacy, please contact Lauren Weybrew at lweybrew@douglasgould.com or 646-214-0514. Learn more about the Center for Medicare Advocacy at www.medicareadvocacy.org

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The Center for Medicare Advocacy, Inc., established in 1986, is a national nonprofit, nonpartisan organization that provides education, advocacy and legal assistance to help older people and people with disabilities obtain fair access to Medicare and necessary health care. The organization focuses on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care. The organization is involved in writing, education, and advocacy activities of importance to Medicare beneficiaries nationwide.

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