Background Paper

Medicare Advantage Payment Policy
September 24, 2007


Mark Merlis, Consultant


Medicare Advantage (MA) plans have become a source of supplemental benefits for many Medicare beneficiaries. In many cases, MA plans are able to finance these extra benefits only because Medicare is paying them more than it would have spent to cover the same beneficiaries on a fee-for-service basis. As Congress considers curbing MA plan payments, this background paper explains how MA plans are paid and reviews recent trends in plan participation and enrollment. It then considers key issues raised by proposals to change the payment system.

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