The continuing cost of privatization: extra payments to Medicare Advantage plans jump to $11.4 billion in 2009

The Medicare Modernization Act of 2003 explicitly increased Medicare payments to private Medicare Advantage (MA) plans. As a result, MA plans have, for the past six years, been paid more for their enrollees than they would be expected to cost in traditional fee-for-service Medicare. Payments to MA plans in 2009 are projected to be 13 percent greater than the corresponding costs in traditional Medicare--an average of $1,138 per MA plan enrollee, for a total of $11.4 billion. Although the extra payments are used to provide enrollees additional benefits, those benefits are not available to all beneficiaries-- but they are financed by general program funds. If payments to MA plans were instead equal to the spending level under traditional Medicare, the more than $150 billion in savings over 10 years could be used to finance improved benefits for the low-income elderly and disabled, or for expanding health-insurance coverage.