Payments to private Medicare Advantage (MA) plans have exceeded Medicare fee-for-service (FFS) costs since those payments were increased by the Medicare Modernization Act of 2003 (MMA). Payments to MA plans in 2010 exceeded average costs in FFS Medicare nationally by 8.9 percent, a total of $8.9 billion. While these extra payments are substantial, they represent a decrease relative to 2009, when MA payments were 13.0 percent, or $11.4 billion, greater than FFS costs. The decrease in MA payments relative to FFS costs, while mostly resulting from policy decisions and other factors not directly related to the health reform law, begins to shift MA payments toward levels mandated in the provisions that are set to go into effect in 2012.
