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Medicare Advantage's Rapid Growth is Facing Few Obstacles for Stalling Out

Analysis  |  By Jay Asser  
   June 08, 2023

The private program has been unencumbered in its take-off and it's unclear how much upcoming CMS regulations will challenge that.

The Medicare Advantage (MA) takeover is no longer coming—it's already happened.

The private program hasn't exactly stealthily crept in like a thief in the night to become the plan of choice for seniors either. Rather, MA's growth has been impressively consistent and steady over recent years, and there's little reason to think the trend will suddenly stop.

However, speed bumps for payers may be on the way in the immediate future in the form of CMS regulations, but competition is expected to continue driving MA forward.

To better understand where MA is going though, it's necessary to understand how and why it has boomed to this point.

The new normal

For the first time ever, half of all eligible Medicare beneficiaries are now enrolled in a MA plan, according to recently released enrollment data from CMS. In 2007, less than one in five (19%) eligible Medicare beneficiaries were enrolled in the private program.

In a study published in Health Affairs, researchers from the USC Schaeffer Center found that MA added 22.2 million beneficiaries from 2006 to 2022 for a growth of 337%, all while enrollment in traditional Medicare declined by one million (-2.9%). MA penetration increased from 16.9% in 2006 to 49.9% nationally in 2022 and 24% of Medicare beneficiaries with Parts A and B lived in a county with adjusted MA penetration equal to greater than 60%.

It isn't just that MA's enrollment is going up, it's that beneficiaries are migrating over from traditional Medicare at a rapid rate. Research published in JAMA Health Forum revealed a higher rate of switching from traditional Medicare to MA than in the opposite direction from 2017 to 2020, with switching accounting for new MA enrollment growth, increasing from 49% in 2016 to 67% in 2020.

The shift has continued this year. As MA grew by a record 2.7 million members in 2023, traditional Medicare lost 1.3 million beneficiaries, according to analysis by The Chartis Group.

MA can appeal to beneficiaries in ways traditional Medicare can't, namely through it's extra benefits, such as dental and vision, and lower out-of-pocket spending. MA has also aggressively and deceptively marketed to seniors to the point it has drawn restrictions from CMS.

There's also the fact that the aging population is at an all-time high, resulting in more potential enrollees than ever. According CVS Health's recent Health Trends Report, more tan one in five people will be over the age of 65 by 2030.

"Moreover, this age group is more proactive and involved in their well-being than any previous generation, and medical advancements will continue to extend lifespans," Terri Swanson, president of Aetna Medicare, told HealthLeaders. "These factors have triggered a significant transformation in the payer market, which we have taken into account in our strategy."

Evolving to stave off stiff competition

Naturally, as MA's presence continues to expand, payers are fighting for their piece of the pie.

Most of the record MA growth this year was propelled by for-profit insurers, which accounted for 84% of the increase in enrollment, The Chartis Group's analysis found. Overall, the 10 largest for-profit insurers make up 70.6% of MA enrollment nationally, with the top five payers accounting for 67.1%.

For 2023, the typical beneficiary had a choice of 43 MA plans as an alternative to traditional Medicare, which was more than double the average number available in 2018, according to Kaiser Family Foundation.

"Companies are also diversifying their plan offerings to meet consumers' needs," Swanson said. "In short, more choices lead to intensified competition."

So how are payers thinking when it comes to differentiating themselves from the competition and ensuring that enrollment growth doesn't stagnate? Swanson outlined her and Aetna's mindset:

"To achieve continued growth, we must assess and take advantage of the available opportunities that enable us to drive better health outcomes and quality of care for our members, such as value-based care arrangements. This enables us to collaborate with our providers to promote preventive care and help our members age actively. It also means examining how and where care is being delivered and making it simpler and more convenient. For example, we recently built upon existing capabilities with new, strategic acquisitions to enhance our in-home and primary care offerings via Signify Health and Oak Street Health.

"Finally, more health care companies, like Aetna, are recognizing the influence of social determinants of health and incorporating services and benefits into their plans to address these non-medical needs. Over time, CMS introduced regulatory changes that enhance Medicare plan flexibility and help drive innovation. This has allowed us to offer our members more tailored benefits that better meet their total health needs—physical and mental—and simplify their health care journeys."

Hurting the bottom line

Payers offerings MA plans have enjoyed how the program's growth has affected their earnings, but the gains may not be the same going forward due to the changes in CMS' 2024 MA final rule.

The changes to the risk adjustment model in particular have the potential to affect insurers' pockets. Though the rule will allow the federal agency to collect billions of dollars in overpayments made to MA payers, CMS ultimately decided to phase in the risk adjustment changes over the next three years. The federal agency said MA plans will see an average payment increase of 3.32% due to the phase-in, instead of the 1.03% in the advance notice.

"BCBSA acknowledges the necessity of many of the updates and is appreciative of CMS' more measured approach towards implementation," Kelly Parsons, spokesperson for Blue Cross Blue Shield Association, told HealthLeaders in a statement. "However, the projected decrease in revenue for MA plans and beneficiaries could have negative downstream impacts for certain segments of MA plans and their beneficiaries, potentially making growth more challenging, particularly for smaller, regional plans in highly competitive markets."

UnitedHealth Group CEO Andrew Witty shared similar concerns in a recent investor call following the company's release of its first quarter earnings report, but stated the payer is "encouraged and optimistic" that its MA growth won't slow down.

How payers truly feel about the changes will depend on how the next year-plus plays out. Everyone will have to deal with the same regulations, but the MA market may skew even more to the giants at the top.

One thing is clear though: MA is here to stay.

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Medicare Advantage has come a long way in the past decade or so, with half of all eligible Medicare beneficiaries now enrolled in a private plan.

Terri Swanson, president of Medicare for Aetna, tells HealthLeaders the payer's strategy for furthering that growth in a market with plenty of competition.

That competition may soon be affected by regulations CMS has implemented in its 2024 Medicare Advantage final rule, especially the risk adjustment changes that are likely to affect insurers' revenue.

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