Payment policy and the growth of Medicare Advantage

This paper reviews recent trends in Medicare Advantage, examining program costs, access to plans, enrollment, plan bids, and benchmarks. We find that current policy has favored the growth of particular types of plans. Bid data show that plans are paid, on average, 113 percent of what expenditures would have been under the traditional Medicare program. Although some of the plan payments are used to finance extra benefits for enrollees, paying plans at higher than fee-for-service levels could affect the sustainability of the Medicare program and result in increased costs for all taxpayers and beneficiaries.