Enrollment in Medicare Advantage plans has jumped 63 percent since 2005. Over 22 percent of all Medicare beneficiaries – 8.8 million total – now receive their Medicare Part A and Part B benefits through a private health plan instead of the traditional fee-for-service system. About 88 percent of all Medicare Advantage plan enrollees also receive their Part D drug benefits from the same health plan (as part of a MA-PD).
A new analysis confirms that Medicare Advantage plans provide significantly more health benefits and lower cost sharing than traditional fee-for-service (FFS). The value-added of health plan enrollment is greatest for Medicare beneficiaries enrolled in the genuinely managed care options, notably HMOs, PPOs, and Special Needs Plans (SNPs). The 20 percent of Medicare Advantage enrollees in relatively unmanaged Private Fee-for-Service (PFFS) plans receive extra benefits compared to the government-run traditional fee-for-service system. However, the HMO, PPO, and SNP options provide substantially more benefits and lower cost sharing than the PFFS model plans. The PFFS plans, which are controversial on Capitol Hill, typically operate only in rural areas.
To sum up, in terms of extra benefits for Medicare beneficiaries, Medicare Advantage plans using the HMO, PPO, or SNP models are superior to both traditional fee-for-service and PFFS plans. The PFFS plans are superior to traditional fee-for-service, at least in terms of extra benefits and cost sharing.