Just how much competition exists between Medicare Advantage (MA) plans sparked a recent debate when a Commonwealth Fund study argued: “Not much.”
Using the Herfindahl-Hirschman Index (HHI), the standard means of measuring market concentration, Commonwealth Fund researchers found that 97% of markets in the United States in 2012 were dominated by only a small number of MA plans. That number might get even smaller, with merger-and-acquisition activity possibly creating three major insurers out of the present top five.
Even among the 100 counties with the greatest numbers of Medicare beneficiaries, more than 80% do not have competitive MA markets, according to the Commonwealth Fund study, which came out in 2012. Market power is concentrated among three nationwide insurance organizations — UnitedHealthcare, the Blue Cross and Blue Shield plans, and Humana — in nearly two thirds of those 100 counties, the report says.
No, no, no, MA’s defenders tell Managed Care. The issue isn’t solely about competition among MA plans, but between MA plans and traditional Medicare.
“The largest competitor is traditional fee-for-service Medicare, which remains the choice of more than two thirds of beneficiaries,” says Cynthia B. Michener, an Aetna spokeswoman. An Aetna–Humana merger that’s in the works would serve only 8% of the current 54 million Medicare beneficiaries, with the remainder being served by the government and more than 140 private insurers.
Elizabeth Carpenter, a vice president at Avalere, the consulting company, agreed that MA plans have an incentive to compete with traditional Medicare because beneficiaries can switch out of one to the other at enrollment time.
“In addition, Medicare beneficiaries who are also eligible for Medicaid may join, switch, or disenroll from their MA plan at anytime throughout the year,” Carpenter tells Managed Care.
Still, Commonwealth Fund researchers have their doubts and question just what MA plans would be competing for.
“Although increased market power among health insurers may lead to lower prices from health care providers, it is not clear that it results in lower premiums for consumers and purchasers,” the study states.
True, says Carpenter, but medical-loss ratio requirements limit just how much MA plans can spend on administration or gain in profits and, as a result, “potential savings from lower provider rates are likely to be passed onto consumers.”
Be wary, the study states, of claims that competition among MA plans will reduce costs and improve quality.
“Under a premium-support system, for example, local payment amounts would be heavily influenced by the bids submitted by a small number of health insurance firms in each local market; many of these firms have substantial marker power nationwide, as well.”
Doesn’t matter, says Michener. “Seniors who choose Medicare Advantage can move back to the traditional Medicare program if they feel prices are too high.”
In addition, “Some of the entrants to the Medicare Advantage marketplace over the past few years are, in fact, providers themselves.”