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      Why Medicare Advantage Plans Pay Hospitals Traditional Medicare Prices

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      Health Affairs
      Health Affairs (Project Hope)

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          Abstract

          <p class="first" id="d5178408e104">The policy community generally has assumed Medicare Advantage (MA) plans negotiate hospital payment rates similar to those for commercial insurance products and well above those in traditional Medicare. After surveying senior hospital and health plan executives, we found, however, that MA plans nominally pay only 100-105 percent of traditional Medicare rates and, in real economic terms, possibly less. Respondents broadly identified three primary reasons for near-payment equivalence: statutory and regulatory provisions that limit out-of-network payments to traditional Medicare rates, de facto budget constraints that MA plans face because of the need to compete with traditional Medicare and other MA plans, and a market equilibrium that permits relatively lower MA rates as long as commercial rates remain well above the traditional Medicare rates. We explored a number of policy implications not only for the MA program but also for the problem of high and variable hospital prices in commercial insurance markets. </p>

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          Author and article information

          Journal
          Health Affairs
          Health Affairs
          Health Affairs (Project Hope)
          0278-2715
          1544-5208
          August 03 2015
          August 03 2015
          : 34
          : 8
          : 1289-1295
          Article
          10.1377/hlthaff.2014.1427
          26240241
          f4bc3ccf-50a9-4573-aa7b-303815bc6909
          © 2015
          History

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