Medicare Advantage seeing enrollment gains, but growth is slowing

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Despite strong enrollment gains, market growth for Medicare Advantage seems to be slowing, according to the 2024 Medicare Advantage competitive enrollment report released by Chartis and HealthScape Advisors.

The Medicare Advantage market grew by 1.7 million beneficiaries (5.4%) in 2023, slowing down from the record growth of 2.7 million (9.4%) in 2022, the report found. This ongoing enrollment growth is fueled by an increasing senior market but is overshadowed by regulatory pressures, declining quality scores and rising medical costs.

For-profit carriers such as UnitedHealthcare, Humana and Aetna collectively captured 1.4 million new members, representing 86% of the market's growth in the past year. These growth trends come on the heels of a major market milestone of more than 50% of Medicare-eligible individuals enrolling in a Medicare Advantage plan.

According to a Chartis survey representing 19 unique insurers, even with decelerating growth, 79% of plan executives express optimism about the next five years, expecting neutral or positive overall outcomes. And 84% anticipate membership growth equal to or greater than the current year, indicating confidence in the stability and growth potential of the market.

WHAT'S THE IMPACT

Among other findings, Special Needs Plan (SLP) enrollment has surged, adding 1.2 million members. Nearly seven in 10 new Medicare Advantage enrollees opted for SNPs, with the growth particularly pronounced in Chronic Condition SNPs (C-SNPs). The top 5 plans now represent 77% of the SNP market.

The number of plan options is roughly flat from the previous year, with the average senior having access to 44 plans. In contrast, the trend of the past five years has been 80% growth. Preferred provider organizations (PPOs) have increased, constituting 43% of all plans offered, up from 31% in 2019.

Medicare Advantage enrollment and social vulnerability are related, the report found. Counties with higher vulnerability scores show greater penetration rates (53%) compared to counties with lower scores (45%). 

Meanwhile, quality remains a concern as plans struggle to maintain quality scores. Average star ratings continued their decline, and this year about one quarter of beneficiaries are enrolled in a plan with less than four stars.

THE LARGER TREND

Moody's Investor Service recently found that while Medicare Advantage remains attractive to the healthcare industry due to strong growth, high revenue and earnings per member, profitability is on the decline.

The signs began around 2022, when MA earnings were 2% lower than in 2019 despite substantial membership and premium growth. UnitedHealth Group, Humana and Aetna, which together comprise more than half the MA market by membership, have fared better, generally maintaining margins. Newer entrants, with smaller market shares, have struggled.

Despite the challenges, MA remains popular with seniors, boasting lower out-of-pocket costs and premiums than traditional Medicare. Analysts cited a 2023 Milliman report showing annual estimated healthcare costs per beneficiary are $3,138 compared to $5,000 for traditional Medicare fee-for-service, and over $5,700 if a traditional Medicare beneficiary also buys a Medigap plan. Besides the lower cost, MA also offers additional benefits such as dental, vision and hearing, which are not covered by traditional Medicare.

In the coming year, more than half of Medicare's 66 million beneficiaries may opt for private Medicare Advantage plans, a development likely to put further strain on an already overstretched healthcare system, according to a recent report in the New England Journal of Medicine.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.