Medicare Advantage growth raises critical financial questions
More than half of Medicare's 66 million beneficiaries are opting for a MA plan, which is likely to further strain the health system.
Photo: Maskot/Getty Images
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 report in the New England Journal of Medicine.
The report, written by Gretchen Jacobson and David Blumenthal, raised several questions regarding the ascendancy of MA, its impact on care quality, cost considerations and the broader implications for the healthcare system.
Jacobson, a vice president at the Commonwealth Fund, and Blumenthal, previously the fund's president, delve into the intricacies of MA, outlining its operational mechanisms, payment structures and performance relative to traditional Medicare.
WHY THIS MATTERS
Medicare Advantage, also known as Medicare Part C, is an alternative to traditional Medicare offered by private insurance companies.
It typically includes additional benefits such as prescription drug coverage, dental, vision and wellness programs, often with different cost-sharing structures compared to traditional Medicare.
A November report from Inovalon indicated MA beneficiaries generally experience improved health outcomes, encountering reduced avoidable hospitalizations, readmissions and lower rates of high-risk medication use.
The authors of the NEJM report question the affordability of a program that costs a minimum of 6% more per enrollee and scrutinized the insights offered by MA's popularity concerning the limitations of traditional Medicare.
This growing expense, even prior to factoring in the effects of selective enrollment into MA, elevates federal expenditures, widens deficits and ultimately heightens costs for all beneficiaries.
The report cautioned the resultant fiscal strains exert pressure to curtail Medicare benefits and elevate federal taxes - both politically complex undertakings.
Furthermore, the escalating clout of the MA sector, accompanied by the substantial enrollment of older voters in these plans, presents political hurdles to significantly altering the program's trajectory. The study also analyzed the implications of MA's popularity on the constraints of traditional Medicare.
The allure of supplementary benefits and capped out-of-pocket expenses within MA designs has magnetized older and disabled Americans, while attempts to incorporate such services within traditional Medicare have met consistent failure due to explicit cost constraints.
The report notes the federal government indirectly shoulders these expenses through augmented payments to plans, and adds that the profits amassed by MA plans - which it says verge on being excessive - may not uniformly represent genuine efficiencies or enhanced value.
"Aside from these broad policy issues, some more-practical questions arise," the study explained. "One concerns how the growth of Medicare Advantage will affect the ability of policymakers and researchers to understand and manage the Medicare program and the health system generally."
The study suggests enhanced federal policies on risk adjustment, coding incentives, payment structures for quality and rectification of market imbalances in MA could improve evaluation of plan value for beneficiaries and taxpayers. It calls for ensuring accurate provider directories to mitigate misleading tactics.
"As Medicare Advantage continues to grow, federal authorities and plan stakeholders face a continuing challenge to craft a program that is affordable, high in quality, and free of abuse and that meets the needs of beneficiaries," the report concludes.
THE LARGER TREND
A recent analysis of 1,300 hospitals revealed escalating reimbursement delays and shrinking cash reserves, highlighting the urgent need for interventions to ease financial strain and maintain consistent patient care.
The American Hospital Association has also urged the Centers for Medicare and Medicaid Services to address MA insurers that are disregarding CMS coverage rules.
The 2024 MA final rule ensures better alignment and coverage parity between traditional Medicare and MA, and increases oversight of Medicare Advantage Organizations (MAOs).
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Email the writer: nathaneddy@gmail.com
