The Evolution of Private Plans in Medicare.

Issue: Since the 1980s, private plans have played an increasingly important role in the Medicare program. While initially created with the goals of reducing costs, improving choice, and enhancing quality, risk-based plans--now known as Medicare Advantage plans--have undergone significant policy changes since their inception; these changes have not always aligned with the original policy objectives.

Goal: To examine major policy changes to Medicare risk plans and the effects of these policies on plan participation, enrollment, average premiums and cost-sharing, total costs to Medicare, and quality of care.

Methods: Review of key policy documents, reports, position statements, and academic studies.

Findings And Conclusions: Private plans have changed considerably since their introduction into Medicare. Enrollment has risen to 33 percent of all Medicare beneficiaries; 99 percent of beneficiaries have access to private plans in 2017. Recent policies have improved risk-adjustment methods, rewarded plans’ performance on quality of care, and reduced average payments to private plans to 100 percent of traditional Medicare spending. As enrollment in private plans continues to grow and as health care costs rise, policymakers should enhance incentives for private plans to meet intended goals for higher-quality care at lower cost.