Medicare Advantage: Advantage for Who?

Medicare Advantage plans are marketed as the convenient, all-in-one alternative to traditional Medicare. But a closer look at how they're paid — and how they treat care — raises a fair question: who's really getting the advantage?

The government pays more per person for Medicare Advantage

The federal government spent $321 more per person for Medicare Advantage enrollees than for comparable beneficiaries in traditional Medicare. Payments to Medicare Advantage plans boosted overall Medicare spending by an estimated $7 billion in 2019.

The government pays Medicare Advantage plans a set rate per person, per year — around $12,000 in 2019 (not including Part D–related expenses) — under what's called a "risk-based" contract. That means each plan agrees to assume the full risk of providing all care for that fixed amount.

Spending and enrollment keep climbing

In 2019, CMS estimated it would pay $236.8 billion to Medicare Advantage plans — an increase of 6.3% over 2018. Over the same period, total beneficiaries grew 2.9%, from 22.6 million in 2018 to 23.2 million in 2019. Medicare Advantage enrollment specifically rose from 19.5 million in 2018 to 20.1 million in 2019.

Hospitals are dropping Medicare Advantage plans

There's been a wave of hospitals dropping Medicare Advantage plans, citing payment disputes and care-authorization friction. For patients, that can mean a plan that looked convenient on paper suddenly leaves a preferred hospital out of network.

The lesson: before you choose Medicare Advantage over traditional Medicare, check which hospitals and doctors in your area actually accept the plan — and confirm it again at renewal, because networks change.