What is the MA Business Model?

• A. Middlemen turn a profit by spending less on care than they have received from CMS
• B. Increase benchmarking and payments from CMS and decrease patient's spending
• C. They rely on cost-shifting to providers
• D. None of the above

Answer: (A)

Medicare Advantage plans operate on a capitated payment model. CMS pays a fixed amount per member per month to an MA plan to cover a defined set of benefits. The plan earns a profit if its actual medical costs for enrollees are below that fixed payment, after accounting for administrative costs and any risk-adjusted payments. The plan achieves this through efficient network design, care coordination, utilization management, and preventive services to keep costly events from occurring. That’s why the best description is that middlemen turn a profit by spending less on care than they receive from CMS. The other choices don’t capture the core arrangement of MA financing and cost control.