By almost any measure, these are good times for Medicare Advantage. Enrollment is growing, the number of insurers in the market is increasing, and gross margins are higher than in other health insurance markets.
By almost any measure, these are good times for Medicare Advantage (MA). Enrollment is growing, the number of insurers in the market is increasing, and gross margins are higher than in other health insurance markets. Some critics say the deck has been stacked in favor of MA and that the federal government is overpaying the insurers who offer MA plans relative to traditional Medicare. But for the legions of baby boomers who have become eligible for Medicare once they turn 65, the allure of MA plans - many with low or zero premiums, built-in Part D coverage, dental coverage, and other additional benefits - is strong. The trade-offs for beneficiaries are a narrower network of providers and managed care hoops to jump through, such as prior authorization and step therapy.
The boom times are enticing new, smaller companies into the MA market, and some are bringing innovative offerings into the market. Meanwhile, private insurers, such as UnitedHealthcare and Humana, are working to move members over from employer-
sponsored plans into MA plans when they hit their 65th birthday, and the federal government is making some effort to expand MA into rural and low-income populations where MA availability lags.
Medicare Advantage used to be called Medicare Part C, and it used to be the overlooked “middle child” of the Medicare program, sandwiched between Part A (for hospital coverage) and Part B (for physician services), and the upstart, Part D (for prescriptions), which became available in 2006. But according to data compiled by the Kaiser Family Foundation, enrollment in Medicare Advantage has been climbing steadily since 2004, when 5.3 million Medicare beneficiaries (13% of the total) were enrolled in MA plans. By 2019, that number had quadrupled to 22 million, and the proportion had grown to 34%. The Congressional Budget Office has projected that enrollment will continue to climb, so that by 2029, close to half (47%) of Medicare beneficiaries will be in MA plans. Twenty years from now, when the youngest baby boomers will be turning 76 and the oldest, 94, some projections show that 70% of Medicare beneficiaries in
Provisions of the ACA that had the effect of lowering payments for MA plans were expected to reduce MA enrollment because it would make the program less attractive to insurers and beneficiaries. Quite the opposite has happened: Enrollment has doubled since 2010. Experts are still trying to figure out why. A 2019 Urban Institute report on the MA payment and enrollment question concluded that the payment cuts to the plans under the ACA weren’t as deep as expected for a variety of reasons. Indeed, the Kaiser Family Foundation’s math shows that between 2015 and 2018, the total of annual quality bonuses paid to Medicare Advantage plans has more than doubled, from $3 billion to $6.3 billion. The bonus payments are tied to quality scores, but some critics say they are flawed as indicators of the MA plan performance, instead rewarding plans for other factors, such as the relationship they have with providers and demographics of the beneficiaries.
The overall upswing in MA enrollment does obscure some of the underlying variability. For example, geographically, enrollment is quite uneven. In six states (Florida, Hawaii, Minnesota, Oregon, Pennsylvania, and Wisconsin), more than 40% of Medicare beneficiaries are in MA plans, while in two states (Wyoming and Alaska), virtually none are.
The Medicare Advantage market is brimming with plans today. For this plan year, over 3,000 plans were available, according to a Kaiser Family Foundation tally. CMS says that the average number of Medicare Advantage plan choices per county increased from 33 plans in 2019 to 39 plans this year. Kaiser’s numbers are lower (28 instead of 39) but still show an uptick.
Insurance start-ups, such as Oscar and Bright Health, who were originally targeting the individual ACA exchange market, are part of the MA land rush. Oscar, based in New York City, started selling MA plan coverage in New York City and Houston this year. Bright Health, a Minneapolis company, started selling MA plans in seven additional markets. Devoted Health, in Waltham, Massachusetts, which bills itself as a “next-generation” MA plan, got started out in Florida markets and expanded into Houston for this plan year.
Meanwhile, the large insurers continue to be the dominant players in the Medicare market, and they are adding hundreds of thousands of beneficiaries to their MA plans. UnitedHealthcare is the leader by far, with 26% of MA enrollees, followed by Humana, with 18%. Those two companies, along with CVS/Aetna and Blue Cross Blue Shield, have about 70% of MA enrollees in their plans.
The smaller companies bring innovations, while traditional healthcare companies cover the mainstream, observes Katie Guhr, president of Advantasure, a healthcare technology and information MA company in Glen Allen, Virginia. “It keeps the product from getting stagnant.”
Some of the major insurers that have been less active in MA market are recognizing the opportunity to provide coverage from the commercial market on through the MA, observes Guhr. She sees a resurgence of healthcare insurance companies recognizing that they have a place in the MA market: “There are more joint ventures than I’ve seen in a long time, leveraging subject matter expertise with unique fit in [the] marketplace.”
Additionally, provider-insurer partnerships are popping up in the MA markets. Ascension Complete is an MA plan that is a partnership of Ascension, the large, not-for-profit Catholic health system, and Centene, which has expanded beyond its home turf, Medicaid managed care, into MA and other markets. Acquisitions are also reshaping the contours of the MA market, notes Guhr. Centene completed its acquisition of Wellcare in January. Anthem purchased a fast-growing MA plan in Florida called HealthSun in 2017; it bought another Florida plan, America’s 1st Choice, about a year later.
MA enrollment tends to lag in rural areas. Many of the roughly 700 “low-penetration” counties, where 10% or less of Medicare beneficiaries are enrolled in MA plans, are in rural areas. Ramping up telehealth is one of the main goals of the Trump administration’s Rural Health Strategy. And starting this year, MA plans are allowed to include telehealth as part of their basic package, not just in the supplemental benefits.
In the past few years, CMS has also focused on “dual eligibles,” low-income seniors who qualify for Medicaid as well as Medicare coverage. Dual eligibles make up roughly 20% of the Medicare population. According to a 2019 report on MA by L.E.K. Consulting, enrollment in Dual Eligible Special Needs Plans, which are a kind of MA plan for dual eligibles, has been growing faster than enrollment in MA overall.
CMS has also opened up MA rules so plans can now cover services to address the social determinants of health, including transportation, meals, and even cleaning. “We’re seeing a lot of organizations really trying to get their arms around community health,” says Guhr. And they’re recognizing the large variability in communities; a cookie-cutter approach doesn’t work for the dual eligibles.
65 years young
Both CMS and the Medicare Advantage plans understand that the senior population they serve is chronologically the same but changing in other ways. More marketing campaigns are conducted digitally and contain social media dimensions, says Guhr. The MA plans see that they need to get smarter about how they approach the consumer. “There’s recognition that a 65-year-old today is still relatively young, healthy, and active. The way 65-year-olds saw themselves in the 1990s or early 2000s is maybe in a state of relaxation - they earned their retirement,” Guhr says. MA plans have started to adjust by changing their marketing and communication strategies and adding benefits designed to prevent disease, not just treat it.
Deborah Abrams Kaplan covers medical and practice management topics.