A major reform in the health-care law was to put private Medicare plans on an increased equal footing with the traditional government program. The Patient Protection and Affordable Care Act changed the payment structure in which the private plans, known as Medicare Advantage, were essentially overpaid in contrast to the traditional fee-for-service plan, receiving about $114 for every $100 spent on traditional Medicare. With about a quarter of Medicare advantage now enrolled in private plans, the change was expected to save a significant amount of money.
Opponent s of the change, including Republican lawmakers, argued that it would result in less liberal packages for seniors from the private plans, which used the extra payments to attract seniors to sign up. While promoting competition among private plans could drive cost reduction and quality, paying private medigap plans more than the traditional model was lavish and counterproductive.
The law has brought costs down; private plans currently receive about $107 for every $100 to traditional Medicare supplement Plan and are on way to get to uniformity as the law continues to be phased in. But the immediate effect of the cuts was considerably narrowed by the Obama administration’s move to expand and speed up a program to pay bonuses to high-performing programs. Under the health-care law, plans that got four or more stars out of a five-star rating system would qualify for extra payments to reward their higher-quality performance. Instead, the Centers for Medicare insurance and Medicaid Services decided to make bonus payments available to plans with three or more stars and raise the size of bonuses this year and next.
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