Document Type

Issue Brief

Publication Date



In 2012, the Medicare program paid private health plans $136 billion to cover about 13 million beneficiaries who received Part A and B benefits through the Medicare Advantage (MA) program rather than traditional fee-for-service (FFS) Medicare. Private plans have been a part of the program since the 1970s. Debate about the policy goals—Should they cost less per beneficiary than FFS Medicare? Should they be available to all beneficiaries? Should they be able to offer additional benefits?—has long accompanied Medicare's private plan option. This debate is reflected in the history of Medicare payment policy, and policy decisions over the years have affected plans' willingness to participate and beneficiaries’ enrollment at different periods of the program. Recently, evidence that the Medicare program was paying more per beneficiary in MA relative to what would have been spent under FFS Medicare prompted policymakers to reduce MA payments in the Patient Protection and Affordable Care Act of 2010 (ACA). So far, plans continue to participate in MA and enrollment continues to grow, but payment reductions in 2012 through 2014 have been partially offset by payments made to plans through the quality bonus payment demonstration. This brief contains recent data on plan enrollment, availability, and benefits and discusses MA plan payment policy, including changes to MA payment made in the ACA and their actual and projected effects.


Issue brief no. 850

Open Access




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