By Healthcare Brew Staff
less than 3 min read
Definition:
Medicare Advantage (MA), aka Part C, an alternative to traditional Medicare coverage, is managed by private companies and paid for by the federal government.
How does it differ from traditional Medicare?
Medicare beneficiaries have access to any doctor or hospital that accepts Medicare, while MA planholders have a more limited network of providers and need prior authorization to receive certain services or medications. Out-of-pocket costs can also vary depending on the service, compared to paying 20% until you meet your deductible under traditional Medicare.
Due to favorable selection, which is when insurers enroll patient populations with lower healthcare costs, MA beneficiaries typically spend less on care than patients of similar health in traditional plans.
According to a 2024 NYU School of Global Public Health study, ethnic and racial minority patients and patients with lower incomes were more likely to enroll in MA plans.
How do the star ratings impact payers?
Patients can rank MA plans using star ratings to help other beneficiaries compare plans, and plans with higher scores can receive bonus payments.
In 2024, a KFF analysis showed that bonus payments totaled around $11.8 billion. Despite that being an increase in bonuses, an Urban Institute report found clinical quality, population health, and administrative effectiveness had decreased in value.
In a March 2025 report, MedPAC predicted Medicare will have paid $583 billion to MA plans, an $84 billion overpayment, by year-end. But the Centers for Medicare and Medicaid announced in early April 2025 that MA plans would receive an average payment increase of 5.06% ($25+ billion), which is more than double the increase in bonus payment spending between 2024 and 2025.
