Fact Sheet

Medicare Advantage Payment Structure

Medicare Advantage is the option in Medicare that offers eligible beneficiaries the choice of private insurance plans to cover all Medicare Benefits.

Key Facts:

• Payment to Medicare Advantage plans are made based on bids at or below the average cost of FFS Medicare beneficiaries by county.

• CMS adjusts Medicare Advantage plan payments to reflect the health of each beneficiary.

• Plans that bid below the benchmark receive rebates to provide enrollees extra benefits. Enrollees in plans that bid above the benchmark pay the difference in the form of a premium.

• Plans with higher Star Ratings receive quality bonus payments.

• Adequate and stable payment is critical for Medicare Advantage plans to care for all eligible beneficiaries.

Policy Recommendation:

CMS should ensure payments are adequate, accurate and stable for Medicare Advantage to appropriately serve all beneficiaries. CMS should address the weaknesses in payment methodology, including benchmark payments based on FFS Medicare costs only for beneficiaries with both part A and B, lifting the benchmark cap, and ensuring payments are accurate and adequate for high-risk beneficiaries with multiple chronic conditions. Consistency and stability in payment enables plans and providers to invest and innovate to improve care delivery and contain costs.