I have received a number of pings and messages to explain why I predict Medicare Advantage (MA) enrollment will continue to rise even with some extensive geographic contraction and benefit reductions in the market by some leading national health plans. Here are some of my thoughts on the subject. I would love to hear others’ impressions as well.
What is happening with plans?
Low or negative rate increases, a return of medical utilization, low Star achievement, and new restrictions on prior authorization are leading to a huge surge in some Medicare Advantage (MA) plans’ medical loss ratios. As such, margins have been reduced considerably.
Almost every large national MA plan has raised concerns, but impacts appear to have been greatest over the past few years on Centene, CVS Aetna, Humana, and Cigna. Centene was forced to reduce benefits and geographic expansions already and may do so again. Humana did so in part in 2024. Humana and CVS Aetna say they will need to do so in 2025. Predictions for contraction of membership are considerable. CVS Aetna says it may have to contract its enrollment by as much as 10% in 2025 after a huge enrollment surge in 2024. Due to ongoing challenges in MA, Cigna is in the process of selling its MA line to Health Care Service Corporation (HCSC).
So why would enrollment in MA continue to climb?
MA growth has been tremendous this decade. The chart below shows that MA enrollment grew by about 40% from January 2020 to January 2024, or 9.54 million. Through May 2024, the growth since January 2000 is now about 42% or 10.05 million.
| Medicare Advantage Enrollment Growth Over The Years | ||||
| Month/Year | Enrollment (M) | Growth (M) | % Change | MA % of Medicare |
| Jan-20 | 23.932 | 38.1% | ||
| Jan-21 | 26.631 | 2.699 | 11.28% | 41.7% |
| Jan-22 | 29.024 | 2.393 | 8.99% | 43.7% |
| Jan-23 | 30.799 | 1.775 | 6.12% | 46.4% |
| Jan-24 | 33.473 | 2.674 | 8.68% | 50.4% |
| May-24 | 33.985 | 0.512 | 1.53% | 51.2% |
| Total Growth | 10.053 | 42.01% | ||
I had predicted a slowdown in growth due to some of the warning signs out there, but I was wrong. The 2023-2024 growth ticked up not down from 2022-2023. Could we face a slowdown going into 2025? Perhaps — after all the industry will likely reduce supplemental benefits to some degree across the board. Rates just don’t support current offerings. Further, there is a movement by hospitals in rural areas to terminate MA plan contracts given prior authorization and claim denial disputes.
But there will be growth just the same because of the continuing contrast between traditional fee-for-service (FFS) and MA. Even with a contraction of supplemental benefits, seniors and persons with disabilities will see themselves as much better off in MA than FFS. The FFS program has major deductibles and cost-sharing as well as a significant inpatient coverage gap. It also does not offer supplemental benefits that are so important to seniors and the disabled.
Even with diminished benefits, MA will continue to offset many of these FFS holes considerably. Admittedly, seniors and the disabled won’t be happy with poorer benefits, but they will still want to stay or enroll in MA. It just makes economic sense for them.
A few other points:
— Those with fixed and low incomes tend to like MA the most. It takes the uncertainty out of their healthcare budgets.
— With a massive erosion of retiree health benefits (that wrap around Medicare) and surging costs of Medicare Supplement policies, an MA plan does provide better certainty as well.
— Part D premiums are also expected to go up over time. MA plans will have more room to cushion those impacts than standalone Part D (PDP) plans that serve the FFS enrollees primarily.
Other plans to the rescue
Members impacted by the contraction at Humana, CVS Health, and other plans and new enrollees should find future homes in MA.
While the seven big plans still dominate over three-quarters of enrollment, there are many robust Blues, startups, and regional plans – some of them non-profits — that look well positioned to pick up lives. Many of them are less impacted by shareholder or investor demands. Many, too, did not over-promise on benefits or over-expand as some national plans did. And some of these plans have not had prior authorization approaches as restrictive as the national plans; they can better adapt to the ongoing utilization management crackdown. While the hold big national plans have on MA is considerable, we may see more competitiveness in the program as a result.
United has been much less impacted by some of the economic trends in MA. The impact is buffered due to the size of United’s MA portfolio, its multi-line-of-business strength, and a strong service operation (even with the Change Healthcare impacts). It has signaled an expansion posture for the future.
I would note two possible negative consequences that could diminish access and some growth in areas. First, MA enrollment grew in rural counties by 48% from 2019 to 2023. About 35% of Medicare-eligible patients in rural areas are now in MA plans. Health plan exits in rural areas could occur both due to financial considerations but also because rural hospitals are terminating contracts and MA plans might not meet network adequacy standards. Second, in some regions the Blues have had only a half-hearted endorsement of MA. They have not built the operational and regulatory infrastructure needed to succeed and could decide to return to what they know best — commercial coverage. This could create issues in some regions of the country.
Conclusion
The poor decisions by the Centers for Medicare and Medicaid Services (CMS) over the past few years will not be helpful for MA or enrollees who count on it. These misguided decisions damage the program. But some plans, including United Healthcare, Scan Group, Clover Health, Devoted Health, Alignment Healthcare, and others, are taking the fiscal pressures as a challenge to further innovate on the best care delivery model to improve quality and lower costs.
These plans likely have it right. MA plans lost discipline during COVID and assumed high Star scores and rates would continue. But rate increases fell and CMS began tightening the screws from a regulatory perspective. With some attention finally on Medicare solvency, so-called overpayments in MA will continue to face scrutiny. As I have pointed out, I think CMS will make changes to risk adjustment. And additional bad news will come. So the old MA operational status quo will need to change. The MA market will still be attractive for so many reasons if done right. The plans that think through change now will have the best chance of financial success over the long term.
Additional reading:
https://www.modernhealthcare.com/politics-policy/rural-hospitals-medicare-advantage-pay-closing
#medicareadvantage #medicare
— Marc S. Ryan
