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Angie Drobnic Holan
By Angie Drobnic Holan April 8, 2010
Back to Eliminate the higher subsidies to Medicare Advantage plans

Health care law eliminates extra payments for Medicare Advantage

President Barack Obama has said repeatedly that the Medicare Advantage program wastes public money that could be put to better use.

The program pays private insurance companies a set rate to treat Medicare beneficiaries. The idea behind the program was that competition between private insurers would drive down costs for treating Medicare patients. But it turns out that Medicare Advantage plans have consistently cost the government more per beneficiary than traditional Medicare.

The health care law that Obama signed in March phases out extra payments for Medicare Advantage plans and institutes other rules for the program. Generally speaking, the extra payments phase out over the next three to six years. In a few cases, plans will be able to keep current funding if they qualify for special bonuses. The measure is expected to save $136 billion over 10 years.

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