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Infographic: A Brief History of Medicare Advantage

Analysis  |  By Marie DeFreitas  
   April 09, 2024

Medicare Advantage has gone through numerous changes and hurdles since its creation.

The recent rate cut to Medicare Advantage is the biggest change we’ve seen to the program since 1997. Created over thirty years ago, Medicare Advantage has gone through much evolution, ups and downs of popularity, and regulation pressures since it began. With the original intention of giving consumers a Medicare option beyond the traditional fee-for-service program, and bringing the financial savings and efficiencies in managed care in the private sector, MA has become a public favorite in recent years with higher utilization.

MA has generally been more expensive than Traditional Medicare, and those overpayments have increased in recent years. In 2019 MA spending was up an estimated $7 billion compared to Traditional Medicare.

The recent rate cut to MA signals a significant shift in the program that has been a public favorite in recent years. For the payer, this change could impact business by potentially reducing overpayments and increasing competition within the MA market.

It is important for payer c-suite leaders to closely monitor these developments and adjust strategies accordingly to remain competitive in the evolving landscape.

Take a look at how MA has changed over time since its creation. 

Medicare Advantage Timeline 

1982:  Tax Equity and Fiscal Responsibility Act (TEFRA) authorizes Medicare to contract with risk-based private health plans.

1985: Rules to implement risk-based contracting are completed and Medicare Part C begins. 

1997: Balanced Budget Act: program renamed to Medicare + Choice: Medicare payments are reformed by extending per-case payment methods to all categories of post-acute care.

2000: Benefits Improvement and Protection Act (BIPA) restores approximately $11.5 billion over five years to hospitals under Medicare, Medicaid, and other federal and state health care programs, but fails to reverse the declining participation of Medicare plans and the enrollment of beneficiaries.

2003: Medicare Modernization Act: Name changed to Medicare Advantage.

2010: Reductions in MA payments are made by Patient Protection and Affordable Care Act.

Marie DeFreitas is an associate content specialist at HealthLeaders.

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