The Medicare Advantage Empire
By Jared Dashevsky, MD
More than 28 million Americans enrolled in a Medicare Advantage (MA) plan in 2022, representing 48% of all Medicare beneficiaries. MA is attractive for both consumers and insurers: patients reap more benefits like hearing and vision coverage while insurers reap bigger profits.
Out of the 58.6 million Medicare beneficiaries, nearly half are enrolled in MA plans. The proportion of those enrolled in MA plans doubled since 2007, from 19% to 48%. The Congressional Budget Office projects this proportion will exceed 60% in 10 years.
Medicare Advantage is attractive. Beneficiaries get extra health benefits not covered by Original Medicare like vision, hearing and dental health, while insurers make a substantial amount of money per patient (over $1,000/patient/month).
There are a couple of big-time players in the MA market. UnitedHealthcare controls around 30% of the MA market, followed by Humana (~20%) and BCBS plans (~15%). Surprisingly, all the insurtech companies we hear about such as Clover Health, Devoted Health, Oscar Health and Bright Health make up less than 1% of the MA market. However, their membership is growing fast with a 39% compounded annual growth rate.
There are three key things to know about the MA:
- It’s attractive for both consumers and insurers.
- It’s fast-growing.
- It’s more cost-effective than alternative payment models like Medicare Shared Savings Program (MSSP).
Researchers recently published in JAMA an analysis of spending differences between beneficiaries in MA vs MSSP. Both of these programs are intended to save Medicare money.
The researchers gathered 16,000 MA and MSSP beneficiaries from 2014 and 2018 and found spending was 22% to 26% higher for MSSP beneficiaries than MA’s, despite controlling for clinical risk factors like diabetes, congestive heart failure, chronic kidney disease and hypertension. Higher outpatient spending accounted for the difference in spending between MA and MSSP. However, why outpatient spending was higher is a bit more nuanced. According to the authors, unstable housing or transportation predisposing to higher acute care utilization are likely to have contributed to the higher spending, but these factors were not measured in the analysis.
Simply put, MA is a hot market and will only get hotter. Change in revenue will increase by around 7.98% in 2023 compared to just 4.08% in 2022. And, MA insurers can play their own games to bump profit through prior authorization tactics. A previous investigation I reported on found that of the 15 of the largest MA organizations:
- 13% of denied prior authorizations would have been approved under traditional Medicare.
- 18% of denied payment requests would have been approved under traditional Medicare.
Profits have likely risen from denying prior authorizations, while problems have increased for providers and patients.