Since the passage of the ACA in 2010, health insurers have been slowly but surely losing one of the chief advantages of their Medicare Advantage (MA) plans: a 14% bump over what traditional Medicare paid per beneficiary. Next year, the difference is scheduled to disappear entirely, when MA payment per beneficiary will match what traditional Medicare pays.
Does this mean insurers will start to exit the MA market in which they have prospered or, short of pulling out completely, perhaps market their plans less aggressively? That is a question health policy experts and others who follow the MA market will ask next year.
The answers may be surprising because the MA program has been defying expectations lately. In 2010, the Congressional Budget Office predicted that bringing MA funding down to traditional Medicare levels would cause a decline in MA enrollment from 10.9 million enrollees (or 24% of all Medicare enrollment) to 8.2 million (15% of Medicare’s total enrollment). Instead, enrollment has continued to climb. In 2016, 17.6 million Medicare beneficiaries—or 31% of all beneficiaries—were in MA plans.
“It’s difficult for seniors to wade through all the differences among Medicare Advantage plans,” says Gretchen Jacobson of the Kaiser Family Foundation.
Why has that happened? One surprising reason: Premiums have declined slightly since the passage of the ACA, from the $44 that enrollees paid per month in 2010 to the $37 they paid this year, the Kaiser Family Foundation reported. A drop in premiums shows MA plans are a stable presence in the health insurance market. Plus, only about 11% of seniors enrolled in MA seek different plans every year. Retaining the remaining 89% means health plans don’t have to spend time and money on marketing.
Insurers say the high retention rate is consistent with high satisfaction scores and evidence of the benefits of private insurers managing care. Gretchen Jacobson, an associate director with the Kaiser Family Foundation’s Program on Medicare Policy, says retention may be less about satisfaction than about the confusion and hassle of shopping for something better. “It’s difficult for seniors to wade through all the differences among Medicare Advantage plans, such as the cost sharing and drug coverage,” Jacobson explains. Ironically, there may be too many choices in some markets. On average, Medicare beneficiaries have 18 different MA plans (many insurers offer multiple plans) to choose from, says Jacobson. That is a more stressful shopping experience than that faced by workers with employer-based coverage, who these days, if they have any choice at all, usually have just two or three plans to pick from. Another reason seniors don’t move around much among MA plans is that it’s difficult—and often impossible—for seniors to compare provider networks.
So, what will MA plans do in 2017 now that they have enrolled beneficiaries and can count on most of them sticking with their plans from year to year? In a post-ACA world, insurers may fight especially hard for the MA program because it has been such a good line of business. House Speaker Paul Ryan’s “A Better Way” plan says it will strengthen the programs by modifying benchmark caps, allowing value-based insurance design, and making other adjustments. Of course, if and when those changes will occur is uncertain.
“As is, we’re not seeing big problems in the Medicare Advantage program, although there are things we’d like to change,” says Ceci Connolly of the Alliance of Community Health Plans.
Ryan’s big idea for changing Medicare is adding a premium support option starting in 2024. If federal payments to MA plans were lowered under that system, the plans may continue to ask beneficiaries to shoulder higher out-of-pocket costs to make up for the lower per-beneficiary funding from CMS, notes Jacobson. Raising premiums and out-of-pocket expenses may eventually make MA plans less attractive to seniors who are younger and healthier than older enrollees, Jacobson says.
“Medicare Advantage is popular and growing because it is a good deal for seniors,” says Ceci Connolly, the president and CEO of the Alliance of Community Health Plans. Connolly is unsure if there is much support for eliminating either traditional Medicare or MA. “We would be interested to know what the concern is with Medicare Advantage,” she says.
“Let’s have a discussion about how to address any legitimate concerns,” she adds. “As is, we’re not seeing big problems in the Medicare Advantage program, although there are things we’d like to change.”