Legislative and Regulatory Options to Improve Medicare Advantage.

Abstract

The Medicare Advantage program was created to expand beneficiary choice and reduce spending through capitated payment to private insurers. However, many stakeholders now argue that Medicare Advantage is failing to deliver on its promise to reduce spending. Three problematic design features in Medicare Advantage payment policy have received particular scrutiny: (1) how baseline payments to insurers are determined, (2) how variation in patient risk affects insurer payment, and (3) how payments to insurers are adjusted for quality performance. We analyze the statute underlying these three design features and explore legislative and regulatory strategies to improve Medicare Advantage. We conclude that regulatory approaches to improve risk adjustment and recoup overpayments from risk-score gaming have the highest potential impact and are the most feasible to implement.