On October 27, the Center for Chronic Disease Research and Policy hosts its 13th annual research symposium, “Medicare Advantage: The Promise, Problems, and Potential Solutions,” featuring a keynote lecture by 2020-2026 Medicare Payment Advisory Commission (MedPAC) chair Michael Chernew, Leonard D. Schaeffer Professor of Health Care Policy at Harvard University. The day-long symposium also features talks by George Weyer, MD, Chief Population Health Officer at University of Chicago Medicine, Courtney Hedderman, MPA, Senior Associate State Director for Advocacy and Outreach at AARP Illinois, and Matt Eyles, MPP, Executive Vice President of Government and Business Strategy at Alignment Health, a Medicare Advantage insurance company.
Created in 1965, Medicare is the federal government program that provides health care coverage to people over the age of 65, originally on a fee-for-service basis. Operated by the Centers for Medicare and Medicaid Services, parts A and B of the program help cover inpatient care in hospitals and skilled nursing facilities, some home health care and hospice care, as well as outpatient care, some prescriptions, and other medical services. In 1972, Medicare expanded to cover people under 65 with certain disabilities and end-stage renal disease. In 2005, an optional prescription drug benefit (Part D) was added.
A conceptual promise, not being fulfilled
Managed health care first became part of Medicare through demonstration projects starting in 1972 in which the program contracted with health maintenance organizations (HMOs) to provide care on a capitated basis – a fee per member based on the estimated cost of their care. Medicare Advantage, also known as Medicare Part C, was established in 1997 (under the name Medicare+Choice) as a permanent alternative to traditional Medicare that allows enrollees to receive care through a private insurance plan contracted with the government to receive fixed payments per member to provide for their care. In contrast to traditional fee-for-service Medicare, which incentivizes providing more services to receive more payments, fixed payments incentivize Medicare Advantage plans to reduce costs to obtain profits. This includes the incentive to keep enrollees healthier so that they need less care over time. Conceptually, managed care could thus correct for the inefficiencies of the existing system, while improving quality by providing coordinated health care that eliminated unnecessary treatments and streamlined health care use among its patients.
However, in practice, Medicare Advantage has never worked quite as envisioned. In fact, according to analyses by the Medicare Advisory Payment Commission (MedPAC), an independent, nonpartisan agency that analyzes access to care, cost and quality of care, and other issues affecting Medicare, it has consistently increased costs. The March 2026 MedPAC report states, “We estimate that Medicare will spend 14 percent—a projected $76 billion— more for MA enrollees in 2026 than it would spend if those beneficiaries were enrolled in FFS Medicare.”
“Not only has Medicare Advantage never saved money for Medicare, we actually pay MA plans substantially more, on average, than we would be paying for traditional Medicare,” says health economist and symposium co-organizer R. Tamara Konetzka, PhD, Louis Block Professor of Public Health Sciences at the University of Chicago, associate director of the Center for Chronic Disease Research and Policy, and one of the 17 commissioners on MedPAC. “Clearly, part of the conceptual promise of managed care is not being fulfilled because of how we pay Medicare Advantage and the associated incentives.”
While managed care companies have an incentive to minimize costs, the tools they have developed to do so–particularly prior authorization and denials of claims–limit care. “It's not always clear whether Medicare Advantage plans are simply getting rid of unnecessary care or are actually stinting on useful and helpful care that beneficiaries should have access to,” says Konetzka. “Medicare program statutes say all beneficiaries should have access to certain services, so we want them to have as much access to high-value services as is necessary for their health.”
One common problem in how we pay for Medicare Advantage plans is inaccuracies within the calculated monthly payments for patients, which are adjusted according to risk factors that include age, gender, and chronic conditions.
“Risk adjustment is always imperfect,” she notes. “No matter what context it’s applied in, it’s always imperfect, and it always will be.” However, managed care companies can boost their profits by over diagnosing diseases and conditions that raise their risk adjustments, increasing their monthly payments without necessarily providing any additional care. Research shows that the way managed care companies code comorbidities is vulnerable to misuse and does not always result in follow-up visits, procedures, tests, or supplies.
Even patients with chronic conditions can comprise a broad spectrum of health outcomes, with some requiring more care than others. For example, the payment system adjusts for patients with a heart condition to compensate for the costs of their care. However, among these patients, some may need frequent medical care, whereas others may improve their health on their own through lifestyle changes.
“The research shows that many managed care companies have figured out how to get healthier patients, a phenomenon known as ‘favorable selection,’” says Konetzka. “Some of it may be intentional and some of it may be just by the benefits that they offer and who's interested in signing up for that plan. These two problems—upcoding comorbidities and favorable selection of healthier patients—lead to us basically not saving money from Medicare Advantage.”
Nevertheless, traditional fee-for-service Medicare is also weighted towards overspending because there are no limits on the amount of care patients can receive, a model that is likely to be unsustainable over time.
“When we think about how to improve the value equation in Medicare, some kind of managed care is always part of the solution,” says Konetzka. “But the way the payment rates are currently set up often encourages gaming of the payment rates rather than cost-saving and the actual management of care. Theoretically, Medicare Advantage could be a great thing, but the payment structure is not meeting our goals at the moment.”
With 55% of Medicare beneficiaries currently on Medicare Advantage plans–which may cost less out of pocket for consumers and provide additional attractive benefits, including dental and vision insurance, gym memberships, and more–the plans have become deeply embedded in the American health care system. Consumers choosing Medicare Advantage gain these benefits but in turn have limited networks of providers to choose from and are subject to utilization controls such as denials of care or prior authorization. Yet despite the popularity of Medicare Advantage, consumers may not be fully aware of these tradeoffs until they become ill and face delays or denials for care that may have been recommended by their physicians.
A unique opportunity for conversation
This October, the CDRP research symposium presents a unique opportunity for conversation among specialists with different takes and different stakes in Medicare Advantage, ranging from Chernew, a health policy professor who chaired the body that analyzes Medicare payments and advises Congress, Weyer, a physician charged with ensuring that UChicago Medicine improves quality of care while reducing the cost of care, Hedderman, who works with elected officials and policymakers to advocate for health care for older adults, and Eyles, who works with CMS to develop Medicare Advantage plans that serve 300,000 people in 5 states.
“I'm looking forward to some vigorous debate about how this conundrum can be solved, how we can realize more of the positive potential of Medicare Advantage and reduce the drawbacks,” says Konetzka. “The underlying payment structure really has to change. I hope some of the debate veers into how that could change.”
“For over a decade, the CDRP research symposium has brought together researchers and policymakers to discuss critical topics, propose solutions, and build partnerships to implement these solutions,” says Elbert Huang, MD, MPH, CDRP Director and Professor of Medicine and Public Health. “Medicare and Medicare Advantage pose complex problems that impact all Americans. To have this distinctive panel of speakers share their expertise at our symposium this year will be a unique opportunity to acknowledge all the stakeholders involved and progress together towards meaningful solutions.”
Read more and register for the symposium here.
