Why Medicare Advantage Plans Pay Hospitals Traditional Medicare Prices

Journal Article

Why Medicare Advantage Plans Pay Hospitals Traditional Medicare Prices

Abstract

Surveying senior hospital and health plan executives, we find that, contrary to common assumptions in the policy community, Medicare Advantage plans nominally pay hospitals only 100–105 percent of traditional Medicare rates and, in real economic terms, possibly less. Respondents broadly identified three primary reasons for near–payment equivalence: statutory and regulatory provisions that limit out-of-network payments to traditional Medicare rates, de facto budget constraints MA plans face because of the need to compete with traditional Medicare, and market equilibrium that permits relatively lower MA rates as long as commercial rates remain well above traditional Medicare rates. We explore policy implications of these findings.

Research Area: 

Centers

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