Medicare Advantage growth fueled by people switching from original Medicare
The timing of this switching has implications for how to measure growth in risk scores for new MA beneficiaries.
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Medicare Advantage has steadily grown in popularity and now covers slightly more than half of all Medicare beneficiaries, and one of the drivers of this growth has been people switching from traditional Medicare, especially younger and healthier patients, a Health Affairs study has found.
Switching from fee-for-service Medicare to MA more than tripled between 2006 and 2022, whereas switching from MA to fee-for-service Medicare decreased, a trend that started to gain steam around 2019.
The share of switchers among all new MA enrollees rose from 61% in 2011 to 80% in 2022. Black, dual-eligible and disabled beneficiaries had higher odds of switching in both directions, whereas younger and healthier beneficiaries had higher odds of switching from fee-for-service Medicare to MA, but lower odds of switching from MA to fee-for-service Medicare.
Two-thirds of annual switching between MA and fee-for-service Medicare in 2022 occurred in January, likely reflecting the open enrollment period, the report found.
The share of Medicare beneficiaries in MA plans has risen from 19% in 2007 to 50% in January 2023, and MA now enrolls 30.2 million beneficiaries. The growth in MA share is expected to continue: The Congressional Budget Office projects MA enrollment to grow to 44 million by 2032 (enrolling 61% of Medicare beneficiaries who are eligible to enroll in MA), indicating that MA is expected to become the dominant sector of Medicare.
WHAT'S THE IMPACT?
The share of Medicare beneficiaries enrolled in MA more than tripled between 2006 and 2022, and accelerated especially since 2019.
Between 2006 and 2009 the switching rates from fee-for-service Medicare to MA and from MA to fee-for-service Medicare were similar. But the trends diverged after that, with a general decline in switching from MA to fee-for-service Medicare since 2010, and a general increase in switching from fee-for-service Medicare to MA. By 2022 the switching rate from fee-for-service Medicare to MA outpaced the switching rate from MA to fee-for-service Medicare by more than six times.
Authors said this is likely attributable to legislative provisions in the Affordable Care Act that attempted to bring down the higher MA payments to comparable fee-for-service-based MA payment rates, and the fact that MA payment remained higher than fee-for-service payment despite the narrowing of the payment differential.
The increase in the number of newly eligible Medicare beneficiaries also contributed to the growth of MA enrollment, but at a smaller scale.
The timing of this switching has implications for how to measure growth in risk scores for new MA beneficiaries, which is a major fiscal problem for Medicare, the report found. If a beneficiary switches into MA in January, their risk score can be calculated using diagnoses from the previous year. However, if a beneficiary switches later in the year, it's unclear how to define their base year. Estimates show that 34.5% of switchers in 2022 did so after January, which is a technical challenge for risk adjustment that needs policy attention, authors said.
THE LARGER TREND
As of May, Medicare Advantage now covers just more than half of Medicare beneficiaries, according to data from the Centers for Medicare and Medicaid Services. In January 2023, 30.19 million of the 59.82 million people with both Medicare Part A and Part B were enrolled in a private plan, the numbers show.
Federal spending on bonus payments to insurance companies that offer Medicare Advantage plans will reach at least $12.8 billion in 2023, according to a new KFF analysis. That's a nearly 30% increase from 2022, and more than quadruple the spending in 2015.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
