Glossary Term

MA Benchmarks

Each year CMS calculates a Medicare Advantage (MA) plan’s monthly payment per member using an MA benchmark. The MA benchmark is based on projected average per capita cost of fee-for-service enrollees with Part A or Part B coverage in a given geographic area (including those who do not have both, although MA plans are required to provide both). MA benchmarks (besides for regional and local plans) are typically set at 95, 100, 107.5, or 115 percent of fee-for-service costs for counties in the highest, second-highest, second-lowest, and lowest quartiles of fee-for-service costs, respectively, to contain costs in high-spending areas or encourage MA plan participation in low-cost areas. Overall MA payments can be further adjusted based on star ratings reflecting quality and enrollees’ anticipated health care utilization.

If a MA plan submits a bid to CMS to cover enrollees’ Part A and B coverage at a cost lower than the region’s MA benchmark then a portion of the difference (known as a rebate percentage) is paid back to the plan and used to fund supplemental benefits that are absent in Original Medicare (e.g. providing vision or dental coverage) or lower out-of-pocket costs for plan enrollees.


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