Does Medicare Advantage Cost Less Than Traditional Medicare?

The costs of providing benefits to enrollees in private Medicare Advantage (MA) plans are slightly less, on average, than what traditional Medicare spends per beneficiary in the same county. However, MA plans that are able to keep their costs comparatively low are concen­trated in a fairly small number of U.S. counties. In the 25 counties where the cost differences between MA plans and traditional Medicare are largest, MA plans spent a total of $5.2 billion less than what traditional Medicare would have been expected to spend on the same benefi­ciaries, with health maintenance organizations (HMOs) accounting for all of that difference. In the rest of the country, MA plans spent $4.8 billion above the expected costs under tradi­tional Medicare. Broad determinations about the relative efficiency of MA plans and traditional Medicare can therefore be misleading, as they fail to take into account local conditions and individual plans' performance.