Changes to Medicare Advantage - WSJ.com

Changes to Medicare Advantage - WSJ.com

Our recent column about the impact of new health-care legislation on Medicare prompted many readers to ask about the specific effects on Medicare Advantage programs, which currently cover about a quarter of Medicare recipients.

With Medicare, individuals must choose one of two paths: original fee-for-service Medicare, or a federally subsidized private Medicare Advantage plan, which typically operates like a health-maintenance or preferred-provider organization.

Over the next 10 years, the new health-care law will divert some $132 billion from Medicare Advantage, according to a recent report by George Washington University's Department of Health Policy. This has sparked concern that these plans may reduce benefits, raise premiums, or both.

But the impact is likely to vary from plan to plan. Medicare currently pays Medicare Advantage plans an average of 13% more than the cost of covering the same beneficiaries under traditional fee-for-service Medicare. After the cost cuts are fully implemented, Medicare Advantage plans will still receive slightly more -- about 1% extra overall, according to George Washington University.