The Patient Protection and Affordable Care Act (ACA) provided for cost savings in the Medicare program, in part to underwrite coverage expansion to Medicare beneficiaries, to finance new coverage for those not eligible for Medicare, and to strengthen Medicare’s financial outlook. One cost-saving measure, a reformulation and reduction in payments to private health insurance plans that provide Medicare benefits through the Medicare Advantage (MA) program, had a sound policy basis but was criticized, particularly by opponents of the ACA, as a measure that would lead to increased costs, reductions in benefits, and diminished plan choices to Medicare beneficiaries enrolled in MA plans. Despite dire predictions to this effect, a review of a sample of MA plan offerings in New York State in 2012 shows that Medicare beneficiaries enrolled in such plans did not experience significant benefit reductions or increased costs. While the number of plan offerings decreased, the reduction was mostly caused by the elimination of duplicative plan choices in 2011. Although the MA plan executives we interviewed indicated that further reductions in plan reimbursement in future years—tempered by potential bonus payments for meeting quality and performance metrics—could impact plan costs and benefits, they believed plans will employ a number of strategies to remain in the market and maintain beneficiary benefits and cost structures. However, government regulators and consumer advocates will need to examine MA plan offerings in the coming years to determine the effect of plan reaction to the ACA payments on beneficiaries’ costs for coverage and access to care.
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