Everyone knows Medicare is a healthcare system for seniors. Since 1965, Medicare has been providing healthcare for Americans age 65 or older. But Medicare Advantage is a newer plan, first begun in 1985 as a limited option available only in select markets, known as “HMO risk contracting.” It evolved to a new program established in 1997 as Medicare+Choice. The name changed later to Medicare Advantage in 2003.
Healthcare economist James C. Capretta, writing for the American Enterprise Institute, says Medicare Advantage (MA) has come a long way since those early days. He gives us a review of the present state of MA using three recent reports along with data supplied by the Medicare trustees.
Medicare Advantage is Medicare managed care. Managed care enrollment in Medicare has increased at a steady pace since the option’s first introduction in the 1980’s, with particularly high growth rates over the last decade. MA plans accounted for 40.1 percent of program enrollment in 2020, up from 25.3 percent in 2011.
This trend continues, according to an analysis from The Chartis Group. MA enrollment grew from 37 percent in 2019 to 45 percent in 2022. Much of the growth in MA has been fueled by a drop in enrollment in traditional fee-for-service (FFS) Medicare with many new program enrollees choosing MA. FFS Medicare enrollees have declined by 2.6 million since 2019.
The reasons for this trend are clear. Researchers at the Kaiser Family Foundation have found 39 different MA plans, up from 19 in 2011. Nationwide, insurers are offering a total of 3,834 different MA options! The market is dominated by HMOs and PPOs, which together account for 96 percent of all the plans offered in 2022.
These multiple options offer less expensive supplemental and drug coverage than the alternative options. In 2022, 89 percent of MA plan offerings include part D prescription drug coverage (called MA-PD), and 98 percent of all Medicare beneficiaries have the option to enroll in MA-PD plans that charge no premium beyond what is required for Medicare Part B. A study by Mark Farrah Associates reports that 82 percent of all MA offerings have premiums below $50 per month.
Furthermore, all MA plans are required by regulation to include an out-of-pocket limit on annual costs for services covered by parts A and B. This limit is a major advantage of MA over FFS plans that have no catastrophic protection. To compensate, most FFS enrollees purchase Medigap policies. Most MA plans offer other coverage options, too. Kaiser reports 98 percent include eye exams and eyeglasses, 95 percent cover fitness services, and 94 percent provide dental care at some level.
What’s not to like?
Not every doctor accepting Medicare will also be available on every MA plan. Personally, I participate in some plans, but not others. Many doctors are excluded from certain plans that promise high patient volumes to those who accept lower reimbursements. Recently, a long-time patient of mine switched to an MA plan only to find out later I was not a provider on her new MA plan. Be sure your doctors are providers on a MA panel before you switch.
Mr. Capretta says there is no turning back the clock. MA plans will likely continue to grow in popularity since they have significant potential to bring innovation and efficiency to the provision of medical services to the nation’s elderly. He says the next step should be to improve the payment system so that the competition among MA plans, and between MA and FFs, is fair and delivers savings to taxpayers as well as the program’s beneficiaries.
