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The Affordable Care Act (ACA) is beginning to rein in Medicare Advantage (MA) overpayments by bringing MA payment more in line with what traditional Medicare spends on a given beneficiary.  The insurance industry is not only fighting this payment reform, but has launched a campaign against a 2.3% reduction in payment projected for 2014.[1]   This additional "cut" is actually a projected reduction in MA payment growth rate as a result of a statutorily-required formula that bases MA payments on overall Medicare costs.  In short, because Medicare’s costs overall have grown more slowly than expected in recent years, projected payment increases to MA plans will also slow.   Contrary to arguments by the insurance industry – which pushes for more private market involvement in the Medicare program – insurers that choose to offer Medicare plans should not be insulated from market forces that are slowing the rate of growth of health care costs.

MA sponsors should not expect to retain the excess payments from previous years.  In addition, the Medicare program should ensure its current payments are accurate.  For example, in January 2013, the Government Accountability Office (GAO) issued a report estimating that CMS overpaid private insurers between $3.2 billion and $5.1 billion from 2010-2012 because of inaccurate risk score adjustments.[2]  In addition, Medicare should ensure that MA plans do not "cherry-pick" or skim off the healthier enrollees as targets for enrollment.  Likewise, MA plans should be held accountable for providing appropriate care for all Medicare enrollees.  

As advocates have feared, MA plans may not be appropriate for sicker enrollees who are generally more costly to treat.   A recently released CMS report confirms advocates’ fears by concluding that disenrollment by individuals from MA plans back to traditional Medicare "continues to occur disproportionately among high-cost beneficiaries, raising concerns about care experiences among sicker enrollees and increased costs to Medicare."[3]   In sum, instead of focusing on how much MA payment is being "cut", we should focus on making sure MA plans provide what we’re already paying for.


[1] See, e.g., Center on Budget and Policy Priorities, Off-Charts Blog: “No, the Administration Isn’t Proposing New Cuts in Medicare Advantage Payments”  (3/1/13) by Edwin Park, available at:
[2] General Accountability Office (GAO), “Medicare Advantage – Substantial Excess Payments Underscore Need for CMS to Improve Accuracy of Risk Score Adjustments” (January 2013, GAO-13-206), available at:
[3] Gerald F. Riley, “Impact of Continued Biased Disenrollment from the Medicare Advantage Program to Fee-for-Services”, CMS, Medicare & Medicaid Research Review (MMRR) Vol. 2 No. 4 (2012), available at:  

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