The Growing Importance of Medicare Advantage in Health Policy and Health Services Research
David J. Meyers, Kenton J. Johnston
Abstract
Medicare Advantage (MA) is rapidly growing. Enrollment in the program has increased from 26% of Medicare in 2012 to 42% in 2021, now including more than 24 million beneficiaries. In addition to capitated payment, MA differs from the traditional Medicare (TM) program in that plans can use selective contracting to set specific networks of providers and can offer supplemental benefits not available in TM, such as dental coverage, vision coverage, gym memberships, transportation, and meals services. 2 Medicare Advantage plans often have lower premiums than TM and include annual out-of-pocket payment caps. These differences in costs and additional benefits have contributed to the rapid growth in MA enrollment. The Congressional Budget Office projects that approximately half of Medicare beneficiaries will elect to enroll in MA by 2030. 3 Recent growth in MA comes with implications for numerous Medicare policies. Many current payment models in Medicare presume TM is the dominant insurer for most beneficiaries. For example, in many new TM models, such as accountable care organizations, the Merit-Based Incentive Payment System, and bundled payments, MA enrollees are excluded. Even more pressing, CMS sets payment benchmarks for MA based on TM expenditures in each county. In 2020, MA penetration exceeded 50% in some metropolitan counties. When the majority of beneficiaries in a county are enrolled in MA, beneficiaries who remain in TM may not be an appropriate comparison group when setting MA payment rates.