Reducing Medicare Advantage Benchmarks Will Decrease Plan Generosity, But Those Effects Will Likely Be Modest.

Abstract

Concerns that Medicare Advantage (MA) plans are overpaid have motivated calls to reduce MA benchmarks-the dollar amounts set by the Centers for Medicare and Medicaid Services (CMS) against which MA plans bid to set premiums and fund extra benefits. However, cutting benchmarks may lead to higher MA enrollee premiums and decreased plan generosity. We assessed the relationships between MA benchmarks and plan generosity and benefits. We estimated that a $1,000 per year decrease in benchmarks would lead to small increases in annual premiums of about $60 and increases in annual deductibles of about $27. Copays would also increase modestly, and the propensity to offer benefits would generally decline by less than 5percentage points, with the greatest impact being on the availability of dental, hearing, and vision benefits. These results suggest that although cuts to MA benchmarks would adversely affect plan generosity, those effects would be modest.