Medicare Advantage

The Congressional Budget Office (CBO) has published testimony on the Medicare Advantage program presented by its Director in the U.S. House.

According to the testimony, Medicare Advantage (MA) is a departure from the traditional Medicare fee-for-service (FFS) program by allowing private plans such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee-for-service plans (PFFS) to participate in Medicare.

The Director's main points:

• Unexpectedly strong growth in MA enrollment in 2006-early 2007 led CBO to increase its projections for MA enrollment and spending
• Medicare's payments for MA beneficiares are higher than for FFS beneficiaries, increasing net Medicare spending
• Increase in enrollment and cost differential with traditional FFS are especially large in PFFS plans, which are largely in rural and some suburban areas
• Reducing the payment differential betweeen MA and FFS would result in savings to Medicare but would also reduce the supplemental benefits and cash rebates.

Testimony on the Medicare Advantage Program: Trends and Options (pdf, 20pp/116kB), March 21, 2007

See related FR post, Premium support in Medicare, Dec. 12, 2006