Fewer private equity dollars flowing to Medicare Advantage

Facing rising interest rates and regulatory scrutiny, private equity investments in the Medicare Advantage space are slowing down, according to the Private Equity Stakeholder Project. 

The watchdog group published a report Feb. 13 breaking down private equity investments in Medicare Advantage companies. Investments in the space reached a peak in 2021 before slowing down in 2022 and 2023, according to the report. The increase was possibly spurred by "industry-friendly" rollbacks on marketing regulations. 

New CMS regulations on marketing and broker payments in the Medicare Advantage space could be deterring investors, according to the Private Equity Stakeholder Project. CMS has proposed further regulations in the space, including limiting plan payments to brokers. 

Most investments in the MA space have gone to marketing and brokerage companies, though some smaller plans have been backed by private equity before being sold to larger insurers, according to the report. 

"It remains to be seen how high interest rates and tightened regulations may slow down or even deter new investments over the next few years," the Private Equity Stakeholder Project wrote in its report. 

Investors have raised concerns that the Medicare Advantage sector overall may not be the gold mine it once was, as insurers face lowered benchmark payments from the federal government and rising healthcare utilization. 

Read the full report here. 

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