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Starting in 1997, Medicare Advantage allowed for Medicare Beneficiaries to receive their benefits through private health insurance plans rather than the original Medicare plans.  This works by Medicare paying the private health care company a set amount every month per member.  These private plans are required to offer benefits that are at least as good as that of Medicare.

A positive effect of this is that beneficiaries are able to tailor their plans for their individual needs, while a negative effect is that the private insurance companies often charge an additional amount each month to cover lost revenue.

The Health Care Reform Act of 2010 proposes several changes to Medicare Advantage.  The list is as follows:

  • In order to meet budget requirements, it is estimated that Medicare Advantage will be cut by $132 billion over the next ten years.
  • These cuts will take effect starting in 2011 and it is possible they will result in extra benefits being dropped from current plans.
  • Beginning in 2012, in addition to a transaction period, Medicare Advantage benchmarks will be reduced to levels relative to those that will occur in 2011.
  • These benchmarks will vary between 95% and 115% of Medicare spending.
  • High quality plans are eligible for incentive payments.
  • Special needs plans program extended through 2013.

Also, there will be one new requirement effective by 2014.  This requirement is that practices must maintain an 85% medical loss ratio.  The penalty for failing to meet this requirement is suspended beneficiary enrollment or even contract termination.  Another penalty for failing to reach an 85% ratio is a rebate to the Department of Health and Human Services


Posted in Your Financial House »



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