How is medicare advantage funded

Practice patterns differ among counties, so their benchmarks also differ. This payment is a monthly premium. A person pays this in addition to the Medicare Part B premium. If the bid is lower than the benchmark, the plan gets a rebate from Medicare that is a percentage of the difference between the bid and the benchmark. Plans that receive rebates should use a portion of the rebates to fund supplemental benefits or to reduce premiums.

When the bid is lower than the benchmark, the bid becomes the base rate. In contrast, when the bid is higher than or equal to the benchmark, the benchmark becomes the base rate. After the establishment of the base rate, Medicare uses risk adjustment to change the rate to reflect the anticipated healthcare costs of a person enrolled in a plan.

For example, if someone has a risk score of 1. A risk score of 0. Two trust funds held by the United States Department of the Treasury supply the money for Medicare payments. The Hospital Insurance Trust Fund pays for inpatient hospital care, home health care, and skilled nursing facility care — types that Part A covers.

Sources of this trust include:. The money comes from:. If there is a nationwide rise in people choosing Medicare Advantage over original Medicare parts A and B, the percentage of total Medicare spending on the plans may also rise. The plans receive some funding through monthly plan premiums, but most of the money comes from Medicare.

The private insurance companies that offer the plans receive a payment each month from Medicare. This covers the costs of Medicare parts A and B for each beneficiary. The amount of the payments from Medicare depends partly on the anticipated costs of healthcare in the county where each beneficiary lives.

Learn more here. Medicare Advantage is another name for Medicare Part C. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare. Your email address will not be published. Write comment. Save my name, email, and website in this browser for the next time I comment. Speak with an agent today! Updated on September 21, How is Medicare Part A Funded? How is Medicare Part B Funded? How is Medicare Advantage Funded?

Medicare Advantage plans are insurance plans that beneficiaries utilize through private insurance companies. Three sources of revenue for Advantage plans include general revenues, Medicare premiums, and payroll taxes.

Advantage plan companies receive payments from Medicare. Medicare makes separate payments for any plans that provide prescription drug coverage. Plans are paid for by Medicare through a bidding procedure. Bids are submitted depending on the costs for each member for services. Private insurance companies receive a set amount of federal Medicare funding for providing Part A and Part B coverage through Medicare Advantage plans. Each insurance company is approved and contracted by Medicare and must fulfill guidelines for coverage as established by the government.

Medicare Advantage plans are also financed by monthly premiums paid by subscribers. The premium amounts vary by company and plan. Subscribers may also be asked to pay a certain amount of their expenses in the form of a deductible or copayment.