KFF November 20, 2025
Issue Brief
Medicare Advantage, the private plan alternative to traditional Medicare, covers over half of eligible Medicare beneficiaries. Initially, one of the goals of having Medicare contract with private plans was to generate savings for the Medicare program by introducing competition between private plans. However, private plans have never generated savings for Medicare, in part because the way Medicare pays private insurers has never sufficiently accounted for the differences in health status between beneficiaries in traditional Medicare and those enrolled in Medicare Advantage plans. In addition, the payment system was designed to attract insurers to the Medicare Advantage market, providing payments sufficient to maintain profitability as well as to fund supplemental benefits, which are valued by enrollees. This has limited...
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