The Affordable Care Act (Pub. L. No. 111–148 ) set payments to MA plans at the average of competitive bids in the payment area, with a gradual transition to a 100 percent competitively determined benchmark price by 2015. But the reconciliation act passed shortly after the main bill stripped the competitive pricing provisions from health reform. Behind this rollback were three key considerations. First, competitive pricing was supposed to save $177 billion over ten years. Many critics (e.g., John Kyl in a speech to the Senate on March 24) seized on this number and used it to argue that Obama was cutting Medicare benefits. The final reconciliation bill substituted administrative pricing methods for competitive pricing and introduced bonus payments for plans that achieved high quality ratings, thereby significantly reducing the size of the cuts to MA plans.
Second, in the final push to pass the reconciliation act, the administration had to contend with reluctant House members who had been pressured by leadership to vote for the Senate bill without any changes. The House had already passed its own reform legislation that included administrative pricing methods. The return of administrative pricing in the reconciliation act can be seen as a way to satisfy some reluctant representatives.
Finally, the reconciliation bill significantly tilted the payment cuts away from low-paid areas. While representatives from high-paid areas may have been gouged, the winners from this change were more numerous than the losers.
This is consistent with my own speculation as to why competitive bidding was stripped from health reform.