Also known as: Medicare Part C, Part C, MA plan, Medicare Advantage plan, MA-PD
Key facts
- Legal basis
- Part C of Title XVIII, Social Security Act; regulations at 42 CFR Part 422
- Origin
- Medicare+Choice (1997), renamed Medicare Advantage in 2003
- Payment model
- Monthly risk-adjusted capitation per enrollee
- Common plan types
- HMO, PPO, private fee-for-service and Special Needs Plans
- Quality program
- Medicare Star Ratings, which drive quality bonus payments
What is Medicare Advantage?
Medicare Advantage lets Medicare beneficiaries choose a private plan instead of Original Medicare. The plan must cover the services Original Medicare covers, with limited exceptions such as hospice, and most plans also include Part D prescription drug coverage (MA-PD plans). Many add extra benefits such as dental, vision and hearing.
The current program was created as Medicare+Choice by the Balanced Budget Act of 1997 and renamed Medicare Advantage by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. By 2023, about half of eligible Medicare beneficiaries were enrolled in Medicare Advantage plans.
How Medicare Advantage works
Plans submit annual bids to CMS, which compares each bid to a county benchmark. CMS pays the plan a monthly amount per enrollee, adjusted for each person's health status using the CMS Hierarchical Condition Category (CMS-HCC) risk model. Plans that bid below the benchmark receive a rebate that must go back to enrollees as extra benefits or lower premiums.
Plans can use provider networks, prior authorization and other utilization management tools that Original Medicare mostly does not use. Common plan types include:
- Health Maintenance Organizations (HMOs), which generally require in-network care.
- Preferred Provider Organizations (PPOs), which cover out-of-network care at higher cost sharing.
- Special Needs Plans (SNPs) for people with chronic conditions (C-SNPs), dual eligibility (D-SNPs) or institutional needs (I-SNPs).
- Private fee-for-service and Medical Savings Account plans, which are much less common.
Why Medicare Advantage matters
Medicare Advantage moves many coverage decisions from CMS to private insurers. For drug and device makers, formulary and prior authorization policies vary plan by plan even inside Medicare. A CMS final rule effective in 2024 requires MA plans to follow Original Medicare coverage criteria, including national and local coverage determinations, and limits when plans can apply their own criteria.
For providers and network teams, MA enrollment changes who negotiates rates and which physicians are in network in a market. Risk adjustment rewards complete diagnosis coding, which makes MA coding practices a frequent subject of audits and enforcement. CMS publishes monthly enrollment by contract, plan and county, a standard public source for sizing plans and markets.