Before 2006, Medicare Advantage in its current form didn't exist. Now, the public-private program is expected to overtake traditional Medicare this year — how did it get here?
Medicare Advantage basics
- Medicare is a federal insurance program that started in 1965 to primarily provide health coverage to Americans 65 and older.
- Medicare Advantage is a federally-approved plan from a private insurance company that provides more coverage than traditional Medicare.
- In 2022, 28.4 million people were enrolled in MA out of 58.6 million Medicare beneficiaries overall – or 48 percent.
- Medicare is divided into four parts:
A: Hospital insurance (hospital, skilled nursing, home health and hospice services)
B: Medical insurance (outpatient services, physician visits, preventive screenings)
C: Medicare Advantage
D: Prescription drug insurance
- The Centers for Medicare and Medicaid Services (CMS) oversees all Medicare plans. In 1997, Part C (MA) was created, and Part D was introduced in 2006.
- Traditional Medicare includes Parts A and B, though Part B is optional. MA plans cover Parts A, B and D benefits.
- When Congress created MA, it was initially called Medicare+Choice. In 2003, most Medicare+Choice plans were rebranded as Medicare Advantage.
- Supplemental Medicare, or Medigap, are plans that can be purchased from commercial payers by traditional enrollees to cover more services.
- Part C (MA) operates under a capitated fee, or when MA insurers are paid a set amount per beneficiary, and then pay for their health expenses. Traditional Medicare is fee-for-service, where providers are paid per service delivered.
- If a provider accepts Medicare, enrollees are able to receive care there. MA members are typically confined to a select network of providers for non-emergency care, but coverage must meet or exceed traditional Medicare standards.
Terminology: Words and phrases associated with MA
- Preferred Provider Organization (PPO): An MA plan with a large provider network that members pay less to use. Out-of-network providers can provide covered services for a higher cost, and emergency care is always covered. PPOs make up 40 percent of MA offerings in 2023.
- Health Maintenance Organization (HMO): An MA plan where care is only covered with in-network providers, except for emergency care. HMOs account for 58 percent of MA offerings in 2023.
- HMO-Point-of-Service (HMO-POS): HMO plans that allow some out-of-network services for a higher copayment.
- Dual-Eligible Special Needs Plans (D-SNP): Special MA plans that provide coverage to beneficiaries eligible for both Medicare and Medicaid.
- Private Fee-for-Service (PFFS): A fee-for-service MA plan that pays set amounts for care. Most PFFS plans have provider networks that charge less. They must cover out-of-network care, but usually at a higher cost – these make up less than 1 percent of plans.
- Accountable Care Organization (ACO): A group of providers who join together to provide high-quality care to Medicare patients. ACO models are overseen by CMS, and several types now exist.
- Prior authorization: Permission needed from the insurer for coverage, often for specialists or out-of-network care. Part D plans usually require PA for specialty drugs, but the process is plan specific.
- Star ratings: An annual performance rating from CMS ranging from 1 to 5 stars, with 5 being the highest. Plans with four or more stars receive monetary bonuses that then must be used to improve benefits.
Medicare Advantage today
- MA is expected to make up half of all Medicare enrollment in 2023. Under current growth, the program will hit 69 percent by 2030.
- A record 3,998 MA plans are available nationwide in 2023, up 6 percent from the previous year.
- The average beneficiary has 43 MA plans to choose from in 2023, up from 38 in 2022.
- In 2023, 57 MA and Part D plans earned a five star designation, a decline from 2022, when 74 plans earned the designation.
- The average star rating across all plans for 2023 is 4.15, down from 4.37 in 2022.
- The top five reasons enrollees chose MA plans over traditional in 2022:
More benefits: 24 percent
Out-of-pocket limit: 20 percent
Recommended by trusted people: 15 percent
Offered by former employer: 11 percent
Maintain same insurer: 9 percent
- The largest MA insurers in 2022:
UnitedHealthcare: 7 million
Humana: 5.1 million
BCBS plans: 4.1 million
CVS Health/Aetna: 3.3 million
Kaiser Permanente: 1.8 million
Centene: 1.5 million
- The average monthly MA premium is projected to be $18 for 2023, down from $19.52 in 2022.
- Part D average premiums for 2023 are expected to be $31.50, down from $32.08 in 2022.
- The standard monthly premium for Part B enrollees is $164.90 for 2023, a decrease of $5.20 from 2022.
- Traditional Medicare members spent about 7 percent more on average for healthcare compared to MA members in 2019, according to an AHIP study published Sept. 21.
- MA members spent $1,965 less on average on out-of-pocket costs and premiums annually compared to traditional Medicare beneficiaries in 2019, an April 19 study from the Better Medicare Alliance found.
- Around 16 percent of MA enrollees switch insurance after one year of enrollment, an Oct. 4 study in the American Journal of Managed Care found. Nearly half switched insurers by their fifth year.
- MA enrollees received 9.2 percent fewer low-value services than their counterparts using traditional Medicare, a study published Sept. 9 in JAMA Open Network found.
- About a third, or 31.6 percent, of the 57 MA plans that earned five stars in 2023 are a part of the Alliance of Community Health Plans, a trade group representing integrated payer-providers.
- MA plans were the most likely health plans to use alternative payment models in 2022, with 57 percent using some kind of alternative payment. Of those, 35 percent used a risk-based model.
- Half of the 13 percent of employers who offered retirement health benefits in 2022 did so through MA plans, up from 26 percent in 2017, according to a report from Kaiser Family Foundation published Dec. 1.
- In 2023, 1,111 MA plans will offer extra benefits beyond vision, dental and hearing, which is up from 351 in 2020.
- Percentage of MA plans offering extra benefits in 2022:
Vision: 99 percent
Hearing: 98 percent
Fitness: 98 percent
Dental: 96 percent
Remote access: 72 percent
Meals: 71 percent
Acupuncture: 45 percent
Transportation: 39 percent
In-home support: 12 percent
Bathroom safety: 9 percent
Part B rebate: 7 percent
Telemonitoring: 4 percent
Plans with caregiver support: 4 percent
- Texas saw the most growth in MA offerings from 2022 to 2023, with 42 more plans. That was followed by Florida (26) and Pennsylvania (21).
- Alabama had the highest MA enrollment rate (53 percent of all Medicare) in 2022, while Wyoming had the lowest (6 percent).
- In 34 percent of metropolitan areas, one payer controls more than half of the MA market, according to a 2022 AMA report. In 91 percent of metros, one payer controls at least 30 percent of the market.
- Humana offers MA plans in 89 percent of U.S. counties in 2023, and UnitedHealthcare offers plans in 84 percent.
- Number of counties payers offering MA plans in 2023:
*There are 3,143 counties
BCBS affiliate: 2,466
CVS Health/Aetna: 1,978
- Counties with the most MA plans available:
1. Summit County, Ohio: 87
T-2. Cuyahoga County, Ohio: 84
T-2. Medina County, Ohio: 84
T-4: Lake County, Ohio: 83
T-4: Stark County, Ohio: 83
- Alaska, Montana, South Dakota and Wyoming have the least 5-star MA plans available, with one in 2022. New York and Ohio have the most 5-star plans, with 12 available.
To date, nearly every major insurer has been accused of or settled allegations of MA fraud from the federal government. Payers have been accused of exploiting the program through elaborate coding schemes that make patients appear sicker on medical records than they actually are — thereby leading to higher payments from CMS. Insurers dispute these claims. MA overpayments to payers are estimated to have cost as much as $25 billion in 2020.Physicians told The Washington Post in June that it is common practice for payers and health systems to "data mine" a patient's medical history if that individual is covered by MA because the program pays a set amount based on patient risk.
- Some experts have said the issue stems from the flexibility of interpretation around current MA risk adjustment coding guidelines — others expect there to be increased scrutiny of the program in 2023.
Recent policy moves
- CMS issued a proposed rule Dec. 6 that would require electronic prior authorization processes among MA organizations.
- CMS is cracking down on deceptive marketing practices and no longer allows MA or Part D prescription drug plans to advertise on television without agency approval as of Jan. 1. The agency said it issued the new policy after reviewing thousands of beneficiary complaints regarding confusing, misleading or inaccurate information from plans — plan sponsors are also responsible for all marketing activities from brokers and third-party agencies.
- CMS issued a proposed rule Dec. 14 to continue its efforts to overhaul prior authorization and marketing practices around MA and Part D plans, along with adding health equity measures to star ratings and boosting behavioral health network adequacy requirements.
- A CMS rule revising MA and Part D marketing and communication regulations went into effect June 28 to increase oversight over third-party marketing organizations.