Medicare Advantage Defies the Odds

For those not familiar, Medicare Advantage is a program that allows seniors to receive their Medicare Part A and B benefits from a private health plan contracting with the federal government.  The involvement of private plans has caused the program to become the source of heated debate.  As a result, its payment structure and funding have seen some good years and some not so good years.  But through the ups and downs, seniors have continued to vote with their feet and enrollment has increased at a steady rate.

Upon passage of the Affordable Care Act (ACA), the Congressional Budget Office (CBO) estimated the law would reduce funding to Medicare Advantage by just over $200 billion over ten years.  As a result, the CBO also estimated the law would reduce enrollment in the program by about 4.8 million over the same ten years – falling from a projected level of 13.9 million to 9.1 million by 2019.  But the Medicare Advantage program seems to be defying the odds and CBO’s projections.  As of this month, Medicare Advantage enrollment is just over 16 million, or about a third of all Medicare enrollees.  While CMS predicted the program would grow by about 4.7 percent for 2014, Medicare Advantage is currently growing at a rate closer to 7 percent.

Despite the program’s popularity, Medicare Advantage continues to face its toughest challenge to date.  While the ACA’s unprecedented cuts are being implemented, plans also have to adapt to a new payment system, regulatory limitations on benefit design, and new quality rankings.  Private plans are rising to the challenge.  Plans continue to innovate and adapt in the face of major reforms so that seniors continue to benefit from the lower costs, additional benefits, and coordinated care they have come to rely on.  The health plan’s investment has paid off in the form of consumer satisfaction – patient satisfaction with Medicare Advantage is around 90 percent.

Some will rightly point out that Medicare Advantage has been the recipient of some help from the Centers for Medicare and Medicaid Services (CMS) since the ACA became law – including the decision to assume Congress will avert physician spending cuts when calculating MA rates to a multi-billion dollar quality demonstration project.  Additionally, facing unprecedented bipartisan opposition from over 190 House members and 40 Senators, CMS also recently delayed some policy changes related to risk-adjustment and home assessments that would have further reduced Medicare Advantage funding.  While decisions by CMS have allowed plans to maintain some level of stability in the face of double digit statutory cuts, the program continues to grow for other reasons.

More and more Medicare Advantage plans are not only offering lower cost-sharing and additional benefits compared to traditional Medicare, but also leading the way on innovative delivery system reforms that result in higher quality care and better outcomes.  A 2013 study by Boston Consulting Group analyzing over 3 million claims found that beneficiaries enrolled in Medicare Advantage plans have shorter hospital stays, receive more preventive care and greater care management resulting in higher quality and better overall value than traditional fee-for-service.  Health plans collaborate with physician groups and other providers to pay based on quality and efficiency rather than volume.  In fact, many of the delivery system reforms mandated in the ACA intended to achieve the same results in Medicare Part B, from medical homes to bundled payments, are already thriving in the Medicare Advantage program.

The ACA’s Medicare Advantage cuts and regulatory challenges will continue to unfold over the next few years.  The program is certainly not out of the woods.  But if history is any indication, health plans will continue to adapt and innovate in order to provide a good value for America’s seniors.  With growing bipartisan support, baby boomers turning 65, and a regulatory environment that allows for innovation, Medicare Advantage enrollment should continue to defy the odds and play a larger role in creating a sustainable, modern Medicare program for future generations.


Andrew McKechnie is currently with the Government Affairs firm Peck Madigan Jones and a former health policy advisor to the Senate Finance Committee.

Morning Consult