A study by George Washington University’s Department of Health Policy projects that the health care reform law will divert $132 billion from Medicare Advantage (MA) over the next 10 years.  Currently, MA plans pay an average of 13 percent more to cover beneficiaries than traditional fee-for-service (FFS) Medicare.  The study projects that after the cuts to MA are fully implemented, MA plans will pay an average of 1 percent more than FFS Medicare.  However, the study notes that there will be significant variance at the local level, with MA plans costing from 5 percent less to 15 percent more than the average cost of traditional Medicare in any given area.

From the report:

The Health Care and Education Affordability Reconciliation Act of 2010 makes major changes to Medicare Advantage (MA) payment policies. Overall, payments to MA plans will be reduced from the current national average of 113 percent of local fee‐for‐service (FFS) costs to a new average of 101 percent of FFS costs. The Congressional Budget Office (CBO) has estimated that the new polices will reduce Medicare spending by $132 billion over 10 years. The new policies will set county payment benchmarks for MA plans at 115 percent, 107.5 percent, 100 percent, and 95 percent of local FFS costs depending of the relative level of FFS costs in the county. The MA plan rebate policy will be reduced from the current level of 75 percent. A new program of plan performance‐based payments will be available to certain plans and will increase benchmarks and rebates to plans with high performance scores. This issue brief presents analysis, sing data from 2009, of the impact of these new policies on payments o private plans across the nation.

Full report: Medicare Advantage Payment Provisions: Health Care and Education Affordability Reconciliation Act of 2010 (PDF | 637.43 KB)

George Washington University, School of Public Health and Health Services. (2010). Medicare Advantage payment provisions: Health Care and Education Affordability Reconciliation Act of 2010. Biles, B. and Arnold, G.