Medicare Advantage was created in 1997 as Part C of the Medicare program to allow beneficiaries to obtain coverage in a health maintenance organization (HMO) instead of the traditional fee for service (FFS) plans under Parts A and B.  In 2003, the statute that created Part D prescription drug coverage made changes to Medicare Advantage that provided more benefits at lower costs.  The plans usually include some dental or hearing coverage, fitness benefits, out-of-pocket maximums, and prescription drug coverage. 

Medicare Advantage is competitive, with 43 plans to choose from in 2024, and now covers 51 percent of Medicare beneficiaries, compared to 47 percent in 2021.  Medicare Advantage delivers an average of $2,434 more in savings to beneficiaries compared to FFS Medicare.  The average premium for 2023 Medicare Advantage plans was $18 per monthand the program has a 95 percent consumer satisfaction rating.

A 2021 Milliman report found that each dollar spent by the federal government on Medicare Advantage provides beneficiaries with additional benefits and lower cost sharing than they would otherwise receive under FFS Medicare.  For example, the report estimated the value of reduced cost sharing and additional benefits at $123 per member per month: $48 for the reduction in cost sharing for Medicare-covered services and $76 for the value of additional benefits not covered by traditional Medicare.  With approximately 22 million beneficiaries enrolled in individual Medicare Advantage plans, this equates to $32.5 billion annually in additional benefits.

But like many other federal programs, Medicare Advantage is being disadvantaged by bureaucratic meddling.  On January 31, 2024, the Centers for Medicare and Medicaid Services (CMS) released a proposed payment rule update for 2025 Medicare Advantage and Part D that would dramatically affect Medicare Advantage options and costs for patients. According to a Berkley Research Group (BRG) analysis, Medicare Advantage beneficiaries could see their supplemental benefits reduced or cost-sharing increase by an average of $33 monthly in 2025.  Even worse, CMS’s proposed rates for Medicare Advantage plans in 2025 will not offset rising medical costs.  The BRG projected that medical costs would rise between 4 percent and 6 percent in 2025, and CMS's proposal would cut plan benchmark payments by 0.16 percent, according to the agency's estimates. 

A March 19, 2024, letter to CMS led by Rep. Virginia Foxx (R-N.C.) with 46 signatories argued in favor of protecting Medicare Advantage and against the proposed rates.  The letter stated, “In addition to lower costs for seniors, Medicate Advantage plans offer out-of-pocket spending limits, care coordination, and additional benefits such as dental, vision, and prescription coverage—often with no additional premiums.  This is possible because robust competition and choices that enable our constituents to choose from among MA plans that compete to provide additional benefits and services at lower costs than government-run FFS Medicare.  

“Given this record of success, it is baffling that the Centers for Medicare and Medicaid Services (CMS) has proposed a nearly 0.2% cut to the Medicare Advantage insurer reimbursement rate for 2025.  This is in addition to the 1.12% cuts MA took in 2024. As a result, insurers offering MA plans are already signaling that plan benefits may be cut which will undermine the program and hurt seniors. … It is out of concern for our constituents that we request that CMS reevaluate the proposed MA cuts for 2025.  The stability and quality of the hugely successful MA program should not be put in jeopardy by these proposed cuts. … Above all, we believe that the MA effective growth rate for 2025 should be set at a level that allows MA to flourish and American seniors to continue to receive the high-quality affordable health care coverage they have enjoyed under the MA program.”

Government interference in the healthcare marketplace has not lowered prices, and instead of undermining Medicare Advantage, the Biden administration should focus on addressing Medicare insolvency and protect and improve Medicare Advantage by building on those aspects of the program that work well, including the market-based approaches in the current system.