Which payment arrangement is typically used by Medicare Advantage plans?

• A. Fee-for-service payments to providers.
• B. Capitation payments to providers with network-based care management.
• C. Per diem payments for inpatient stays.
• D. Salary-based payments to hospitals.

Answer: (B)

Medicare Advantage plans typically pay providers with a capitation model within a defined provider network, combined with network-based care management. That means the plan gives providers a fixed amount per enrolled member (often per member per month) to cover most of the member’s care, and providers work within an organized network to coordinate and manage services. This setup encourages cost control, care coordination, and preventive focus, since providers are incentivized to keep overall spending and avoid unnecessary services.

Fee-for-service payments, where providers are paid for each service, tend to drive higher volume and higher costs and aren’t the typical MA approach. Per diem payments tied to inpatient days and salary-based payments to hospitals don’t align with the MA risk-sharing, network-based model as the primary reimbursement method.