The challenges Medicare Advantage insurers are facing now aren't without precedent, according to an analysis from OliverWyman.
In the late 1990s, Medicare+Choice, the precursor to Medicare Advantage, faced rising medical costs and lowered reimbursements. According to OliverWyman, an advisory firm, lawmakers capped reimbursement increases at 2% annually, while healthcare inflation costs grew between 5% and 10%.
Between 1998 and 2002, the number of Medicare+Choice contracts shrank from nearly 350 to 147. Several insurers exited the program entirely.
Insurers that embraced "rigorous financial discipline" stayed in the program, analysts wrote.
To avoid the pitfalls that led contracts to shrink in the Medicare+Choice era, MA plans need to prioritize margins over growth and plan out bid strategies early. The mindset change is not likely to be easy for most organizations.
"It's been more than 20 years since this level of discipline was required, and the need to prioritize margin over growth will be foreign — if not anxiety-inducing — to most individuals and teams executing Medicare Advantage operations today," analysts wrote.
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