Medicare Advantage consists of private plans in which Medicare beneficiaries can choose to enroll. They were made more popular by the Medicare Modernization Act of 2003, which also introduced Medicare’s drug benefit (Part D). If not for Medicare Advantage, beneficiaries would be stuck in the traditional Medicare Part A (physician) and Part B (hospital) plans, where the federal government determines how much to pay providers according to bureaucratic formulae. It’s sort of like Gosplan, the old Soviet economic pricing and planning mechanism.
To escape this fate, one third of Medicare beneficiaries now choose Medicare Advantage plans. However, they are criticized for being paid too much and defrauding the federal government.
Read the entire column at NCPA's Health Policy Blog.