The Commonwealth Fund report said the Medicare Advantage program, created in 2003, allows Medicare beneficiaries to receive Medicare benefits through private insurance plans. However, they have averaged costing 14 percent more a year than traditional Medicare for the taxpayer.
Under the Affordable Care Act the excess payments to private insurance companies will be reduced to 2 percent, saving $132 billion over 10 years, the Congressional Budget Office estimated.
Study author Brian Biles of George Washington University and colleagues applied the Affordable Care Act policies affecting Medicare Advantage to the program's enrollment and spending levels from 2009. The study found substantial savings will be achieved as the law's new rules roll out between now and 2017.
"Since its creation in 2003, Medicare Advantage has been costing the Medicare program billions of dollars every year while providing care that isn't any better than what is offered by traditional Medicare," study co-author Stuart Guterman, vice president and executive director of the Commonwealth Fund Commission, said in a statement. "The Affordable Care Act's changes will bring Medicare Advantage payments closer to traditional Medicare payments, while also providing incentives for plans to focus on providing high-quality care to enrollees."
The study said in addition to the cost savings, the changes in Medicare Advantage will likely lead to increased efforts by participating private insurance companies to track and improve performance as they strive to receive bonus payments.
For the first time, the Medicare Advantage plans that earn a four-star out of five or higher rating on the Centers for Medicare and Medicaid Services' quality rating system -- part of the U.S. Department of Health and Human Services -- will receive higher payments through increased benchmark and rebate payments.
Last month, U.S. Health and Human Services Secretary Kathleen Sebelius, said due to the Affordable Care Act passed in 2010, Medicare Advantage premiums fell by 10 percent, while enrollment rose 28 percent.
Medicare Advantage, which allows seniors to leave traditional Medicare for a healthcare plan conducted by a private insurance company, had been costing 14 percent more to the taxpayer each year, and some feared as this subsidy was phased out Medicare Advantage's premiums would rise or benefits would be cut. The average Medicare Advantage premium in 2013 is projected to increase by only $1.47 from last year, Sebelius said.
The Affordable Care Act reduced the overpayments of the Medicare Advantage while maintaining benefits and keeping premiums low, Brian Cook, a spokesman of the CMS, told UPI.