Medicare Advantage Plans Could Face Enrollment Bans If Payments Exceed Traditional Medicare Costs

This bill section introduces a new financial guardrail for Medicare Advantage (MA) plans, which are the private insurance options within Medicare. Starting one year after the law is enacted, the Secretary of Health and Human Services (HHS) must run a mandatory comparison test every year for every single MA plan.

The test is straightforward: HHS compares the average monthly payment the government sends to the MA plan for each enrollee against the average monthly cost of covering those same individuals under the traditional, fee-for-service Medicare program (Parts A and B). If the MA plan's government payment exceeds the cost of coverage under traditional Medicare, that specific MA plan faces a serious penalty: the Secretary must prohibit any individual from enrolling or re-enrolling in that plan for the entire following year. The only exception to this rule is for specialized MA plans designed for people with special needs.

The 'Are You Worth It?' Test

Currently, the government pays private MA plans a fixed amount per enrollee, often based on a bidding process and a comparison to local costs. This new provision essentially creates a hard cap based on the cost of Original Medicare. The idea here is to ensure taxpayer money isn't flowing into private plans at a higher rate than it would cost the government to provide the exact same coverage directly.

For the federal budget, this could be a big deal. If MA plans are systematically being overpaid relative to the baseline, this measure could force those payments down or eliminate the most expensive plans, leading to significant cost savings for the Medicare program. It’s a move toward tighter financial accountability, trying to make sure the private sector isn't just pocketing the difference.

The Real-World Risk: Less Choice, More Hassle

While fiscal responsibility sounds great, this bill introduces a high-stakes penalty: the enrollment ban. If you’re currently enrolled in an MA plan that fails this cost comparison, you won’t be able to re-enroll next year. You’d be forced to find a new plan, whether that’s a different MA plan or switching back to Original Medicare.

Imagine you’re a retiree who loves your current MA plan because it includes gym membership and dental coverage, and you’ve built a relationship with the plan’s network of doctors. If your plan gets banned because its average payment was calculated as too high, you have to start over. This could severely limit consumer choice, especially in areas where a few large MA providers dominate the market. For people who rely on the stability of their current health coverage, this mandated disruption is a major concern.

The Calculation Conundrum

This entire system hinges on one crucial, yet undefined, element: how the Secretary calculates the “average monthly cost to provide coverage for those same individuals under the original Medicare fee-for-service program.”

This calculation is complex because MA plans often cover different populations with different health needs than those in Original Medicare. If the calculation methodology is too strict or unfairly estimates the cost of care, it could arbitrarily shut down plans that are otherwise competitive or offer valuable extra benefits. The HHS Secretary is given significant power here, and the methodology they choose will determine which plans survive and which are banned, directly impacting the healthcare options available to millions of seniors.