Estimated Fiscal Effects of Medicare Advantage's Quartile Payment System


To encourage more MA plan offerings, better benefits, and greater enrollment, the Affordable Care Act introduced a quartile-based payment system. This system classifies counties into quartiles based on historical Traditional Medicare spending, providing payment boosts to areas with lower spending. The impact of the quartile adjustments on payments to MA plans overall is not well understood. We used national 2013-2021 data to estimate the impact of the quartile adjustments on MA payments. Our sample included 20,447 county-years from 3,215 counties. Thirty-six percent of MA beneficiaries were in counties that received a 95% adjustment in 2013 declining to 26.9% in 2021. Sixteen percent of MA beneficiaries were in counties that received a 115% adjustment in 2013, increasing to 20.7% in 2021. Additional payments via the quartile system increased over the study period due to a shift in MA enrollment towards higher adjustment quartiles, along with an overall increase in MA enrollment relative to Traditional Medicare and benchmark levels. The quartile system generated 796.7 million dollars in payments in 2013 increasing to 11.9 billion dollars in 2021 and totaling 46.7 billion dollars in additional payments since its inception. Our findings suggest Congressional modification of the quartile system can generate sizable savings for Medicare that could be reinvested into Medicare.

JAMA Health Forum