More Patients, Less Pay: Physician Revenue Losses Under Medicare Advantage

Introduction

Medicare Advantage (MA), also known as Medicare Part C, is a private alternative to Traditional Medicare (TM) through which beneficiaries receive their Medicare benefits via managed care plans offered by private insurers. Unlike TM, which reimburses providers directly on a fee-for-service basis under uniform national guidelines, MA plans are administered by private insurers who exercise significant discretion over network design, utilization management (such as prior authorizations), and claims adjudication. Although MA is required to offer the same basic benefits as TM, the operational and financial experience for providers can differ substantially.

Over the past decade, enrollment in Medicare Advantage has grown dramatically. As of 2024, more than half (54%) of all Medicare beneficiaries are enrolled in MA plans (Freed et al., 2024). This trend amplifies the need to understand how these plans impact physician finances.

A seminal 2017 study estimated that the base payment rates for physician services under MA average 91.3% of what Traditional Medicare reimburses (Trish et al., 2017). While this estimate provides a foundation for comparing the two programs, it does not fully reflect the net revenue physicians receive. Compared to TM, MA plans tend to impose higher denial rates, more frequent and burdensome prior authorization requirements, greater administrative overhead, and longer delays in payment.  

This paper builds on prior work by combining these cost drivers into a unified framework to estimate what physicians actually retain under MA. We find that, after accounting for all known differences, physicians ultimately retain only 85% to 91% of what they would earn under TM – a gap large enough to drive major shifts in provider behavior and network participation.

 

Objectives

The goal of this study is to provide a comprehensive and transparent estimate of the actual revenue physicians receive under Medicare Advantage (MA) compared to Traditional Medicare (TM). Prior research has typically isolated specific revenue factors, with individual studies estimating components such as base rate differences, denial rates, or administrative costs. This study builds on that work by synthesizing findings across sources to produce a comprehensive estimate that captures the total impact of MA’s structural features on physician net revenue.

First, we quantify net physician revenue as a percentage of total billed charges under both MA and TM. By expressing results as a share of billed dollars, we offer an “apples-to-apples” comparison that isolates the financial implications of program design rather than differences in service volume or mix.

Second, we integrate five core dimensions of revenue loss, including:

1. Base payment rate differentials: MA plans typically pay a lower percentage of TM rates;
2. Net claims loss from denials: accounting for denied claims that are never reimbursed, even after appeal;
3. Administrative costs related to prior authorizations: identifying the labor and overhead associated with filing prior authorizations
4. Administrative costs related to denied claims: capturing the labor and overhead associated with contesting denied claims; and
5. Revenue loss due to payment delays: quantifying the cost of deferred reimbursement based on the cost of capital.

Finally, we present the cumulative impact of these components to estimate the total difference in effective reimbursement under MA relative to TM. This analysis aims to inform policymakers, providers, and researchers by illustrating how MA affects physician compensation and practice sustainability beyond base rates alone. Our approach relies on conservative, quantifiable inputs drawn from peer-reviewed studies and industry reports while acknowledging that many indirect or behavioral costs remain unmeasured.

Revenue Impact Factors

Base Payment Rate

An important and straightforward difference between Medicare Advantage (MA) and Traditional Medicare (TM) is the base payment rate that physicians receive for identical services. While MA plans are required to cover the same services as TM, they are allowed to negotiate their own rates with providers. These negotiated rates are typically lower than TM’s standardized fee schedule.

A pivotal study by Trish et al. (2017) found that MA physician reimbursement is systematically lower than TM rates. Across a set of common physician services, MA reimbursement ranged from 91.3% of TM rates for cataract removal in an ambulatory surgery center to 102.3% for complex emergency department visits. For one of the most commonly billed services – a mid-level office visit with an established patient – MA paid 96.9% of what TM reimbursed. We use the 96.9% figure in our base analysis as it reflects a broadly applicable average across specialties; more extreme values, such as the 91.3% rate for cataract removal, are addressed in the liberal estimation.

Although this estimate is based on claims data from 2012, it remains the most comprehensive physician-level comparison available. More recent data on MA payment rates has focused largely on plan-level spending, which has increased significantly, suggesting that any gains are not flowing through to providers. Furthermore, recent reports indicate that MA may pay even less than TM in certain settings, such as rural hospitals (e.g., 90.6% of TM rates; American Hospital Association [AHA], 2025), reinforcing the possibility that the base differential has worsened, not improved.

This base payment gap is independent of other loss factors, such as denials or delays, and serves as the anchor for the remaining calculations. All subsequent adjustments for administrative or denial-related losses are made relative to this already-discounted MA base rate.

Net Claims Loss from Denials

Claim denials represent a significant source of revenue loss for physicians. When a claim is denied, providers are not reimbursed for care already delivered, and the burden of appeal or resubmission falls on their administrative teams. Note that this net claims loss from denials does not include administrative costs associated with managing denials – those are captured separately in the administrative burden sections below.

To estimate the magnitude of this loss under Medicare Advantage (MA), we draw from a 2025 Health Affairs study that comprehensively evaluated claim denials using medical claims data representing roughly 30% of the MA market (Vabson et al., 2025). The study tracked 270 million claim submissions from 2019 across the full adjudication process and found that 14.6% of physician claims were initially denied. Of these, just over half (52.2%) were ultimately overturned. Based on a dollar-weighted calculation that excluded overturned denials, the authors concluded that denials resulted in a net loss of 7.0% of physician-billed charges in MA.

While no equivalent study has produced a definitive net denial rate for Traditional Medicare (TM), surveys and administrative reports suggest significantly lower denial rates. A national survey of healthcare providers conducted by Premier, Inc. in 2023 indicated an 8.0% initial denial rate for TM (Alkire et al., 2024).[1] To generate a conservative, comparable estimate of net revenue loss from denials under TM, we assume a similar appeals success rate and apply the ratio of initial denial rates (8.0% ÷ 14.6% ≈ 0.55) to the MA net loss estimate. This results in a 3.85% net claims loss under TM (55% of the MA estimate).

This approach likely understates the full financial impact of denials. The Health Affairs study emphasizes that their estimate excludes partial denials (such as downcoded or underpaid services), indirect behavioral effects (such as physicians avoiding MA patients), and the administrative burden associated with managing appeals. As such, the 7.0% (MA) and 3.85% TM) figures used in our model are conservative, representing only the directly measurable, unreimbursed portion of billed claims.

Prior Authorization Administrative Costs

Prior authorization (PA) requirements impose measurable administrative costs on physician practices. These costs include staff time spent preparing and submitting authorization requests, responding to follow-ups, and tracking approvals. Although typically performed by administrative staff, these tasks increase overhead and reduce net physician revenue.

To estimate the net revenue loss due to prior authorization administrative costs, we multiply the estimated cost per PA request by the average number of PA requests per enrollee per year and divide the resulting product by the average allowed charges per beneficiary.

For both Medicare Advantage (MA) and Traditional Medicare (TM), we use a $5.44 per-request administrative cost, the average of the $6.00 per-request estimate reported by the American Medical Association (Henry, 2024) and the $4.87 estimate from the CAQH 2022 Index (CAQH, 2023).

Kaiser Family Foundation (KFF) data indicate that MA plans processed nearly 50 million prior authorization requests in 2023, averaging ~2.0 requests per enrollee (Biniek et al., 2025). In contrast, prior authorization is rare in TM, with the same report estimating 0.01 requests per enrollee per year.

To express these costs as a share of physician revenue, we divide the cost per beneficiary by average allowed charges. According to the Medicare Payment Advisory Commission (MedPAC, 2023), the average physician allowed charges per TM beneficiary are $3,011. MA reimbursement averages 96.9% of TM levels, yielding an adjusted $2,918 per MA beneficiary (Trish et al., 2017).

These three components – per-request cost, volume per beneficiary, and average allowed charges – serve as the inputs for the prior authorization burden estimates, which are detailed in the calculations section below.  

Denial Administrative Cost

Beyond direct revenue losses, physicians incur substantial costs when appealing or reprocessing denials. These denial administration costs stem from the time and resources required to manage appeal workflows, submit additional documentation, and respond to payer communications. Although these tasks are often handled by staff, they increase overhead and reduce net physician revenue.

It is important to distinguish denial administration costs from the net claims loss described above. The prior metric captures only the unreimbursed value of denied services that are never successfully paid, while denial administration costs capture the burden of pursuing payment – regardless of whether the appeal is ultimately successful.

To estimate this burden, we use a Premier, Inc. analysis that reported an average cost of $43.84 per denied claim for providers, excluding clinical labor expenses which can range from $13.29 (general inpatient) to $51.20 (surgical) (Alkire et al., 2024). These costs reflect typical payer interactions related to outpatient services.

To convert this per-denial cost into a per-beneficiary revenue loss estimate, we multiply the average number of denied physician claims per enrollee by the cost per denied claim, and divide the result by average annual allowed charges per beneficiary to obtain a percentage loss. Calculations are detailed below.

As with prior authorization costs, these values reflect only the direct administrative expense of managing denials. They do not include the opportunity costs of delayed reimbursement, physician time spent on appeals, or indirect effects on practice operations. These figures represent a conservative but measurable estimate of denial-related administration costs.

Payment Delays

Delays in reimbursement reduce the effective value of payments received by physicians, particularly in systems with substantial upfront costs or reliance on consistent cash flow. Even when claims are ultimately approved, a lag in payment can strain operations, especially when delays are systemic and persistent.

Industry reports and surveys reveal that payment delays are more common under Medicare Advantage (MA) than Traditional Medicare (TM). While TM typically processes electronic claims within 14 days and paper claims within 29 days, MA plans can take 30 to 45 days to process similar claims (Best Medical Billing, 2025). This delay imposes an opportunity cost on physicians awaiting reimbursement for services already rendered

These disruptions to cash flow can be significant. The American Hospital Report (AHA) found that, in 2024, 50% of hospitals had over $100 million in accounts receivable more than six months old (AHA, 2024). These delays directly affect practice sustainability and patient access.

To estimate the financial burden of delayed payments, we apply a capital cost framework. The Healthcare Financial Management Association (HFMA) estimates the average cost of capital for physician practices and related entities at 12.1% per year (Rollo, 2020).[2] This figure reflects the implicit interest lost on delayed payments – funds that could have otherwise been used for staffing, operations, or investment. We calculate the annual net revenue loss from delayed payments by multiplying cost of capital by the delay in days and dividing the product by 365 days (see calculations section).

Calculations

To quantify the true financial gap between Medicare Advantage (MA) and Traditional Medicare (TM), we calculate two key outcomes. First, we estimate the net revenue retained by physicians as a percentage of billed charges under each program. This reveals how much of each dollar billed is actually realized after accounting for base rate differences, denials, administrative costs, and payment delays. Second, we estimate the effective revenue under MA as a percentage of TM revenue, providing a direct comparison of physician earnings for equivalent services across the two systems. All estimates in this section are based on conservative assumptions.

1. Base Payment Rate Differential

Medicare Advantage plans reimburse physicians at lower base rates than Traditional Medicare for the same services. Based on Trish et al. (2017), we use a payment ratio of 96.9%, drawn from the most commonly billed service (mid-level office visit with an established patient). This figure represents a typical experience across specialties and settings.

To express the base payment gap as a percentage loss relative to billed charges, we calculate:

This 3.1% reflects the initial reduction in revenue under MA before accounting for additional loss factors.

2. Net Claims Loss from Denials

Denied claims reduce revenue when services are never reimbursed, even after appeals. This category captures the percentage of total billed physician charges that go unpaid due to final claim denials. It does not include the administrative burden of appealing or resubmitting those claims.

Medicare Advantage (MA):

We use a 7.0% estimate for net claims loss from denials, based on findings from Vabson et al. (2025). The study reports that after accounting for overturned denials physician services still faced an average net denial rate of 7.0%, representing the dollar-weighted share of initial denials that were never reimbursed.

Traditional Medicare (TM):

There is no equally comprehensive study estimating TM’s net denial loss, so we use comparative initial denial rates to generate a conservative estimate:

• Initial denial rate (MA): 14.6% (Vabson et al., 2025)
• Initial denial rate (TM): 8.0% (Alkire et al., 2023)

Assuming TM denials are equally or more likely to be overturned due to less restrictive utilization practices, it is reasonable to scale TM’s net claims loss proportionally:

These figures are used in the final calculations to isolate the uncompensated portion of physician services due to denials in each program.

3. Prior Authorization Administrative Cost

Prior authorization (PA) requirements impose administrative costs on physician practices by requiring time and resources to submit, track, and follow up on authorization requests. These include staff time spent responding to payer communications, submitting documentation, and managing denial workflows.

Medicare Advantage (MA):

MA plans impose prior authorization requirements more frequently than TM. To estimate the net revenue loss from PA administrative costs, we take the following steps:

1. Estimate PA volume

In 2023 MA insurers received nearly 50 million PA requests, translating to 2.0 requests per enrollee per year (Biniek et al., 2025).

2. Estimate per-request administrative cost

We assume a $5.44 administrative cost per request, based on the midpoint between AMA’s $6.00 estimate (Henry, 2024) and CAQH’s $4.87 (CAQH, 2023).

3. Compute annual PA administrative cost per beneficiary

$5.44  2.0 = $10.88

4. Use MA average allowed charges for normalization

$3,011 (TM average)  0.969 = $2,918

5. Calculate net revenue loss from PA administration costs

$10.88 ÷ $2,918 ≈ 0.37% net revenue loss

Traditional Medicare (TM):

1. Estimate PA volume

TM requires only 0.01 prior authorizations per enrollee per year (Biniek et al., 2025).

2. Use the same per-request administration cost

$5.44  0.01 = $0.05

3. Use TM average allowed charges

= $3,011

4. Calculate net revenue loss

$0.05 ÷ $3,011 ≈ 0.002%, effectively 0% net revenue loss

 

4. Denial Administrative Cost

In addition to the direct loss of revenue from denied claims, physicians incur administrative costs from pursuing appeals or resubmissions. These costs include staff time spent responding to payer communications, submitting additional documentation, and managing denial workflows. We estimate these denial-related administrative burdens separately from the net claims loss using the following steps:

Medicare Advantage (MA):

1. Estimate the annual number of professional service claims

MA beneficiaries average 21.095 professional visits per year (Mulcahy et al., 2019).

2. Apply denial rate to estimate denied claims

Health Affairs reports a 14.6% initial denial rate for MA physician services (Vabson et al., 2025).

21.095 × 0.146 = 3.08 denied claims per enrollee per year

3. Multiply by per-claim administrative cost

Per-claim administrative cost = $43.85 (Alkire et al., 2024)

$43.84 × 3.08 = $135.03 in denial-related administrative expenses per beneficiary

4. Normalize average allowed charges

Average MA allowed charges = $2,918 (MedPAC, 2023; Trish et al., 2017)

$135.03 ÷ $2,918 ≈ 4.63% net revenue loss

Traditional Medicare (TM):

1. Estimate the annual number of professional service claims

TM beneficiaries average 23.6 clinician encounters per year (Burton et al., 2025).

2. Apply denial rate to estimate denied claims

TM denial rate = 8.0% (Alkire et al., 2024)

23.6 × 0.08 = 1.89 denied claims per enrollee per year

3. Multiply by per-claim administrative cost

Per-claim administrative cost = $43.85 (Alkire et al., 2024)

$43.84 × 1.89 = $82.83 per beneficiary

4. Normalize by average allowed charges

Average TM allowed charges = $3,011 (MedPAC, 2023)

$82.83 ÷ $3,011 ≈ 2.75% net revenue loss

5. Payment Delay Cost

Payment delays reduce the effective value of physician reimbursement by disrupting cash flow and delaying reinvestment into clinical operations. To quantify this burden, we apply a capital cost framework, estimating the lost revenue as a function of the delay duration and the annual cost of capital.

Medicare Advantage (MA):

1. Identify cost of capital

Industry estimates place the average cost of capital for physician practices at 12.1% annually (Rollo, 2020).

2. Estimate average payment delay

MA claims typically take 30 to 45 days to be reimbursed (Best Medical Billing, 2025). We conservatively assume a 30-day delay.

3. Apply revenue reduction formula

Traditional Medicare (TM):

1. Identify cost of capital

As with MA, we use a 12.1% cost of capital benchmark (Rollo, 2020).

2. Estimate average payment delay

TM processes electronic claims in ~14 days and paper claims in ~29 days. We use a 14-day delay as the typical case (Best Medical Billing, 2025).

3. Apply revenue reduction formula

Table 1: Base Calculation Inputs

Component	MA Value	TM Value
Base Payment Rate	96.9%	100%
Net Claims Loss from Denials	7.0%	3.85%
Prior Authorization Admin Cost	0.37%	~0%
Denial Admin Cost	4.63%	2.75%
Payment Delay Cost	1.0%	0.46%

 

Final Base Calculations

To quantify the true revenue gap between Medicare Advantage (MA) and Traditional Medicare (TM), we calculate two summary metrics:

1. What percentage of a physician’s billed charges are actually received under Medicare Advantage?
2. How much more revenue does a physician lose under MA compared to TM?

 

1. Net Revenue Received under Medicare Advantage

We begin with the MA base payment rate – 96.9% of the TM fee schedule – and then sequentially apply each estimated revenue loss:

            Under MA, physicians retain approximately 85.06% of billed charges

2. Net Revenue Received under Traditional Medicare

For TM, we begin with the full fee schedule reimbursement (100%) and apply the loss estimates:

Under TM, physicians retain approximately 93.08% of billed charges.

3. Comparative Loss

Physicians lose 8.02 percentage points more revenue under MA, receiving just 91.4 cents for every dollar earned under TM.

Liberal Estimation

While the base case above provides a conservative, likely median estimate of physician revenue loss under Medicare Advantage (MA), some providers may experience substantially greater losses. This section presents a liberal estimation using lower-end MA payment rates, higher administrative costs, and a higher cost of capital to illustrate a plausible upper bound for physician revenue reduction.

Updated Assumptions

The liberal estimation incorporates assumptions that are less favorable to physicians. The Medicare Advantage inputs are:

1. Base Payment Rate: 91.3% of the TM fee schedule, based on the lower-end estimate from Trish et al. (2017).
2. Net Claims Loss from Denials: 7.0%, consistent with the base calculation and drawn from Vabson et al. (2025).
3. Prior Authorization Administrative Cost: 0.39%, based on a $6.00 per-request estimate from the American Medical Association (Henry, 2025).
4. Denial Administrative Cost: 6.03%, based on a $57.13 per-denial cost from Premier, Inc. which includes the clinical labor costs for a general inpatient stay(Alkire et al., 2023).
5. Payment Delay Cost: 1.46%, reflecting a 17.8% cost of capital specific to physician practices (Rollo, 2020; Best Medical Billing, 2025).

Inputs for Traditional Medicare reflect a slightly higher administrative burden and capital cost than in the base scenario, while still assuming low prior authorization (PA) volume:

1. Base Payment Rate: 100% of the Medicare physician fee schedule
2. Net Denial Loss: 3.85%, consistent with the base case, derived by scaling MA’s 7.0% based on TM’s lower initial denial rate (Alkire et al., 2024).
3. Prior Authorization Administrative Cost: ~0%, due to the near absence of PA requirements in TM (Biniek et al., 2025).
4. Denial Administrative Cost: 3.59%, using the same $57.13 per-denial cost as MA (Alkire et al., 2023).
5. Payment Delay Cost: 0.68%, assuming a 17.8% cost of capital and a 14-day reimbursement delay (Rollo, 2020; Best Medical Billing, 2025).

Table 2: Liberal Calculation Inputs

Component	MA Value	TM Value
Base Payment Rate	91.3%	100%
Net Claims Loss from Denials	7.0%	3.85%
Prior Authorization Admin Cost	0.39%	~0%
Denial Admin Cost	6.03%	3.59%
Payment Delay Cost	1.46%	0.68%

Final Liberal Calculations

1. Net Revenue Received under Medicare Advantage

We begin with the MA base payment rate – 91.3% of the TM fee schedule – and sequentially apply each revenue loss factor:

Under liberal assumptions, physicians retain approximately 78.32% of billed charges under MA.

2. Net Revenue Received under Traditional Medicare

For TM, we begin with the full fee schedule reimbursement (100%) and apply the loss estimates:

Under liberal assumptions, physicians retain approximately 92.02% of billed charges under TM.

3. Comparative Loss

Under liberal assumptions, physicians lose 13.69 percentage points more revenue under MA, retaining just 85 cents for every dollar earned under TM.

Implications

This study’s analysis shows that physicians lose a substantial portion of billed charges under both Traditional Medicare (TM) and Medicare Advantage (MA) due to a combination of denials, administrative burdens, and payment delays. These losses reflect structural inefficiencies in the reimbursement systems, not necessarily clinical quality or productivity. However, the losses are consistently greater under MA, with physicians retaining 8 to 14 percentage points less revenue than under TM.

This gap is especially important given the rapid growth of MA enrollment, which now covers over half of all Medicare beneficiaries (Freed et al., 2024). As MA continues to expand, the cumulative impact on physician practice revenue and sustainability may increase – particularly for smaller practices that lack the administrative infrastructure to manage high denial and prior authorization volumes efficiently.

Key Takeaways for Providers

• Financial Planning: Physicians should not assume that MA and TM patients yield equivalent revenue. Practice-level financial models should account for lower net revenue retention for MA patients.
• Contract Negotiation: When negotiating with MA plans, providers may need to push for higher base rates or advocate for reduced prior authorization requirements, particularly for services with high denial rates.
• Payer Mix Awareness: Understanding the revenue gap between MA and TM may influence decisions about accepting new MA plans, adjusting patient panel compositions, or even exiting specific MA networks if reimbursement structures are unsustainable. Many providers have already stopped accepting MA – or plan to do so soon – due to administrative complexity and financial strain (HFMA, 2024).

Limitations

This analysis relies on secondary data drawn from previously published studies and industry reports rather than primary claims or billing data. While this approach allows for synthesis across a wide range of sources, it limits our ability to perform original statistical testing or disaggregate results by specialty or geography. All figures are drawn from peer-reviewed publications or reputable healthcare organizations, ensuring a high standard of data quality. However, the estimates vary in methodology and year of publication. To ensure relevance and comparability, only the most recent and applicable data were used – most published within the last five years.

Conclusion

Physicians lose a meaningful share of revenue under both Traditional Medicare and Medicare Advantage, but the gap is significantly wider under MA. Even under conservative assumptions, providers retain approximately 8 to 14 percentage points less under MA than TM – the equivalent of receiving only 85 to 91 cents for every dollar earned under TM. As MA continues to grow and dominate the Medicare market, these structural revenue differences are no longer marginal – they are central to the financial viability of provider organizations.

For health systems and physician groups, understanding this discrepancy is critical. Insights into payer-specific revenue loss can guide decisions around contract negotiations, panel management, and administrative resourcing. As costs rise and margins tighten, this is not just a policy issue, it is an operational imperative.

 

References

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[1] We acknowledge that the Premier survey found an initial denial rate of 15.7% for MA. However, to maintain internal consistency with the Health Affairs study – from which we get the foundational 7.0% MA net claims loss from denials – we elect to use their reported 14.6% initial denial rate as a basis for our TM calculations.

[2] Physician group practices specifically face a higher average cost of capital – estimated at 17.8% – according to HFMA benchmarks. We explore the implications of this higher rate in our liberal estimation.