Extra Payments to Medicare Advantage Plans to Total $8.5 Billion

The higher payments for Medicare Advantage plans were originally intended as an upfront investment to stabilize plan participation and increase beneficiary enrollment, with the hope that the plans would eventually drive down the explosive growth of Medicare spending. Even if recently mandated payment reductions to private Medicare Advantage (MA) plans--scheduled to take effect beginning in 2010--had been fully in place in 2008, the plans still would have been paid 10.6 percent more than expected fee-for-service costs, say the authors of The Continuing Cost of Privatization: Extra Payments to Medicare Advantage Plans in 2008.