Reducing Medicare Advantage Payments Would Have Modest Impact on Benefits, Premiums, Study Suggests

If the federal government decreased payments to Medicare Advantage plans — something of a boogeyman for insurers in recent years — would seniors see higher premiums and a reduction in the availability of supplemental benefits? That’s a question a new study published in the April 2023 issue of Health Affairs aimed to answer, to mixed results. 

Using a nationally representative sample of both MA and traditional Medicare data from 2012 to 2019, researchers sought to estimate the impact of changes in MA benchmark payments on plan premiums, member cost sharing and supplemental benefit availability. (One of the study’s four co-authors is Harvard University’s Michael Chernew, Ph.D., chair of the Medicare Payment Advisory Commission, which has long argued that MA plans are overpaid relative to traditional Medicare.) The benchmark is an annual payment established by CMS to determine the maximum amount that Medicare will pay an MA plan for providing services to each member. The amount is calculated based on traditional Medicare costs in a given service area and is adjusted based on member health status and the plan’s individual offerings. If an MA plan's bid is below the benchmark in its county, the difference is returned to the plan and can be used to provide supplemental benefits and/or lower premiums. If the bid is above the benchmark, the plan must cover the additional cost or pass it on to members in the form of higher premiums or cost sharing.