In the telling of MedPAC (the Medicare Payment Advisory Commission, a Congressional agency), the premise governing the government's creation and support of Medicare Advantage, and predecessor private Medicare programs, has always functioned as a kind of slipknot.
The premise is that by managing care efficiently, private insurers will serve Medicare enrollees more cheaply than does FFS Medicare while improving (or at least not worsening) outcomes -- and also pass a good portion of the savings to enrollees in the form of reduced out-of-pocket costs and additional services.
MA plans do serve enrollees more cheaply, in the sense that they pay out less to providers per enrollee. They also pass about $2,000 in annual savings to members in the form of reduced out-of-pocket costs and added coverage, such as (variously limited) dental, hearing and vision care.
What they don't do -- ever -- is save the government (i.e., taxpayers) money, at least not in an absolute sense. By MedPAC's estimate, covering enrollees through MA currently costs about 104% of the cost of covering the same enrollees through traditional fee-for-service (FFS) Medicare.
