Medicare Advantage Continues to Take On a Larger Role in Medicare Program

On April 22, 2020, the Kaiser Family Foundation (KFF) published its annual review of the Medicare Advantage industry, A Dozen Facts About Medicare Advantage in 2020. The report is written by Meredith Freed, a Policy Analyst with KFFs Program on Medicare Policy, Anthony Damico, a Statistical Analyst at KFF, and Tricia Neuman, Senior Vice President at KFF and Executive Director of the KFF’s Program on Medicare Policy. 

Based on the findings of the report, last week, I discussed on my social media channels (LinkedIn, Twitter, and Facebook) several of the reasons why I believe Medicare Advantage continues to take on a larger role in our Medicare program. As I do every year, what follows is a verbatim analysis of the report, its findings, statistics, findings, and conclusions. Medicare Advantage enrollment has grown rapidly over the past decade, and continues to expand and offer new benefits to enrollees. KFF’s data analysis provides current information and trends about Medicare Advantage enrollment, premiums, and out-of-pocket limits. It also includes analyses of Medicare Advantage plans’ extra benefits and prior authorization requirements. The analysis also highlights changes pertaining to Medicare Advantage coverage that have occurred in 2020 in response to the COVID-19 crisis.

Introduction

In addition to traditional Medicare delivery services provided by the federal government, the Medicare system allows for hospital, medical, and medication services to be provided by private health plans, also called Medicare Advantage plans. Having started in 1985, early on, there were questions as to the sustainability of privatizing Medicare services. However, since 2000 we have continued to see a steady and significant growth in the number of Medicare beneficiaries choosing a private health plan to provide for Medicare services.

According to the 2020 Medicare Trustees Report, in 2010, there were 11.7 million Americans, out of 47.7 million Medicare beneficiaries, or 24.5%, receiving their Medicare coverage through a private health plan. By 2019, there were 23.0 million Americans, out of 61.3 million Medicare beneficiaries, or 37.5%, enrolled in a private Medicare Advantage plan.  This year, in 2020, the Medicare Trustees Report forecasts that 25.0 million Americans, out of 62.7 million Medicare beneficiaries, or 39.9%, will be enrolled in a Medicare Advantage plan. By the end of this decade in 2029, it is projected that 33.2 million Americans, out of 76.8 million total Medicare beneficiaries, or 43.2%, will be enrolled in a private Medicare Advantage plan receiving Medicare benefits.

Along with this incredible growth in Medicare Advantage private health plan enrollment, a consistent larger numbers of dollars have gone to private health plans, thereby taking financial resources away from the traditional Medicare system. In 2010, total Medicare payments to private Advantage plans equaled $115.9 billion. By 2019, private Advantage plans received $271.2 billion. This year, in 2020, it is expected that Medicare payments to private Advantage plans will equal $315.3 billion. By the end of this decade, in 2029, it is predicted that $663.8 billion in Medicare payments will be made to private Advantage plans.

The following are major points found within the report that continue to show how Medicare Advantage plans are taking on a larger role in our Medicare program:

1. Enrollment in Medicare Advantage has doubled over the past decade

In 2020, 36% of all Medicare beneficiaries – 24.1 million people out of 67.7 million Medicare beneficiaries overall – are enrolled in Medicare Advantage plans; this rate has steadily increased over time since the early 2000s. Between 2019 and 2020, total Medicare Advantage enrollment grew by about 2.1 million beneficiaries, or 9%– nearly the same growth rate as the prior year. The Congressional Budget Office (CBO) projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to about 51% by 2030.

Nearly one in five Medicare Advantage enrollees (19%) are in group plans offered by employers and unions for their retirees in 2020, roughly the same share since 2014. Under these arrangements, employers or unions contract with an insurer and Medicare pays the insurer a fixed amount per enrollee to provide benefits covered by Medicare. The employer or union (and sometimes the retiree) may also pay a premium for additional benefits or lower cost-sharing. Group enrollees comprise a disproportionately large share of Medicare Advantage enrollees in nine states: Alaska (100%), Michigan (49%), West Virginia (44%), New Jersey (40%), Wyoming (36%), Illinois (35%), Maryland (35%), Kentucky (34%), and Delaware (31%).

2. The share of Medicare beneficiaries in Medicare Advantage plans across the United States ranges from 1% to over 40%

The share of Medicare beneficiaries in Medicare Advantage plans varies across the country. More than 40% of Medicare beneficiaries are enrolled in Medicare Advantage plans in 9 states (HI, FL, MN, OR, WI, MI, AL, PA, CT) and Puerto Rico. Medicare Advantage enrollment is relatively low (20% or lower) in 12 states (AK, DE, KS, MD, MS, MT, ND, NE, NH, SD, VT, WY) and the District of Columbia.

3. The share of Medicare beneficiaries in Medicare Advantage plans varies across counties from less than 1% to more than 60%

Within states, Medicare Advantage penetration varies widely across counties. For example, in Florida, 67% of all beneficiaries living in Miami-Dade County are enrolled in Medicare Advantage plans compared to only 11% of beneficiaries living in Monroe County (Key West).

In 180 counties, accounting for 10% of the Medicare population, more than half of all Medicare beneficiaries are enrolled in Medicare Advantage plans or cost plans. Many of these counties are centered around large, urban areas, such as Monroe County, NY (66%), which includes Rochester, and Allegheny County, PA (60%), which includes Pittsburgh.

In contrast, in 553 counties, accounting for 4% of Medicare beneficiaries, no more than 10% of beneficiaries are enrolled in Medicare private plans; many of these low penetration counties are in rural parts of the country. Some urban areas, such as Baltimore City (18%) and Cook County, IL (Chicago, 26%) have low Medicare Advantage enrollment, compared to the national average (36%).

4. Most Medicare Advantage enrollees are in plans operated by UnitedHealthcare, Humana, or BlueCross BlueShield (BCBS) affiliates in 2020

Medicare Advantage enrollment is highly concentrated among a small number of firms. UnitedHealthcare and Humana together account for 44% of all Medicare Advantage enrollees nationwide, and the BCBS affiliates (including Anthem BCBS plans) account for another 15% of enrollment in 2020. Another four firms (CVS Health, Kaiser Permanente, Centene, and Cigna) account for another 23% of enrollment in 2020. 

For the fourth year in a row, enrollment in UnitedHealthcare’s plans grew more than any other firm, increasing by more than 500,000 beneficiaries between March 2019 and March 2020. This is also the first year that Humana’s increase in plan year enrollment was close to UnitedHealthcare’s, with an increase of about 494,000 beneficiaries between March 2019 and March 2020. CVS Health purchased Aetna in 2018 and had the third largest growth in Medicare Advantage enrollment in 2020, increasing by about 396,000 beneficiaries between March 2019 and March 2020.

5. Half of all Medicare Advantage enrollees would incur higher costs than beneficiaries in traditional Medicare for a 5-day hospital stay

When Medicare Advantage enrollees require an inpatient hospital stay, many Medicare Advantage plans charge a daily copayment, beginning on day 1. Cost sharing requirements for Medicare Advantage enrollees also typically vary by length of stay. In contrast, under traditional Medicare, when beneficiaries require an inpatient hospital stay, there is a deductible of $1,408 in 2020 with no copayments until day 60 of an inpatient stay.

In 2020, virtually all Medicare Advantage enrollees would pay less than the Part A hospital deductible for an inpatient stay of 3 days. But for stays of 5 days, half of Medicare Advantage enrollees would be required to pay more than the beneficiaries in traditional Medicare ($1,644 on average). 64% of Medicare Advantage enrollees are in a plan that requires higher cost sharing than the Part A hospital deductible in traditional Medicare for a 7-day inpatient stay, and 72% are in a plan that requires higher cost sharing for a 10-day inpatient stay.

6. Nearly two-thirds of Medicare Advantage enrollees pay no premium (other than the Part B premium) in 2020

In 2020, 90% of Medicare Advantage plans offer prescription drug coverage (MA-PDs), and 89% of such enrollees are in plans that include this prescription drug coverage. 

60% of Medicare Advantage enrollees pay no premium for their plan, other than the Medicare Part B premium ($144.60 in 2020). However, 18% of beneficiaries in MA-PDs (2.8 million enrollees) pay at least $50 per month, including 6% who pay $100 or more per month, in addition to the monthly Part B premium. 

Among MA-PD enrollees who pay a premium for their plan, the average premium is $63 per month. Altogether, including those who do not pay a premium, the average MA-PD enrollee pays $25 per month in 2020.

7. Premiums paid by Medicare Advantage enrollees have slowly declined since 2015

Nationwide, average Medicare Advantage Prescription Drug (MA-PD) premiums declined by $4 per month between 2019 and 2020, much of which was due to the relatively sharp decline in premiums for local PPOs this past year. Average premiums for HMOs also declined $3 per month, while premiums for regional PPOs increased $3 per month between 2019 and 2020.

Average MA-PD premiums vary by plan type, ranging from $20 per month for HMOs to $32 per month for local PPOs and $47 per month for regional PPOs. 

61% of Medicare Advantage enrollees are in HMOs, 33% are in local PPOs, and 5% are in regional PPOs in 2020.

8. For Medicare Advantage enrollees, the average out-of-pocket limit is $4,925 for in-network services and $8,828 for both in-network and out-of-network services (PPOs)

In 2020, Medicare Advantage enrollees’ average out-of-pocket limit for in-network services is $4,925 (HMOs and PPOs) and $8,828 for out-of-network services (PPOs). These out-of-pocket limits apply to Part A and B services only, and do not apply to Part D spending.

Since 2011, federal regulation has required Medicare Advantage plans to provide an out-of-pocket limit for services covered under Parts A and B not to exceed $6,700 (in-network) or $10,000 (in-network and out-of-network combined). Beginning next year, in 2021, these limits will increase to $7,550 (in-network) and $11,300 (in-network and out-of-network) due to changes in eligibility for beneficiaries with End Stage Renal Disease (ESRD) who will, for the first time, be able to enroll in Medicare Advantage plans. 

9. Most Medicare Advantage enrollees have access to some benefits not covered by traditional Medicare in 2020

Medicare Advantage plans may provide extra (“supplemental”) benefits that are not offered in traditional Medicare, and can use rebate dollars to help cover the cost of extra benefits. Plans can also charge additional premiums for such benefits. Beginning in 2020, Medicare Advantage plans can offer additional supplemental benefits that were not offered in previous years. These supplemental benefits must still be considered “primarily health related” but CMS has expanded this definition, so more items and services are available as supplemental benefits.

Most enrollees are in plans that provide access to eye exams or glasses (79%), telehealth services (77%), dental care (74%), a fitness benefit (74%), and hearing aids (72%). Since 2010, the share of enrollees in plans that provide some dental care, fitness benefits, or hearing aids has increased (from 48%, 52%, and 37% of enrollees, respectively) while the share with a vision benefit has been relatively steady (77% in 2010).

10. Nearly all Medicare Advantage enrollees are in plans that require prior authorization for some services

Medicare Advantage plans can require enrollees to receive prior authorization before a service will be covered, and 99% of Medicare Advantage enrollees are in plans that require prior authorization for some services in 2020. Prior authorization is most often required for relatively expensive services, such as inpatient hospital stays, skilled nursing facility stays, and Part B drugs, and is infrequently required for preventive services. 

The number of enrollees in plans that require prior authorization for one or more services increased from 2019 to 2020, from 79% in 2019 to 99% in 2020. In contrast to Medicare Advantage plans, traditional Medicare does not generally require prior authorization for services, and does not require step therapy for Part B drugs.

Conclusion

So why does any of this matter? Why is it significant that more and more Americans are deciding to receive their Medicare coverage through an Advantage plan? As I already mentioned above, a consistent larger number of dollars continues to go to these private health plans, thereby taking financial resources away from the traditional Medicare system. With the overall Medicare population expected to grow from 78 million by 2030, to 100.1 million by 2070, the traditional Medicare system will need all of the resources it can muster. If private Advantage plans are taking a bigger chunk of these resources year after year, the traditional Medicare system will suffer, and may even run out of money considerably faster than already anticipated.

A weaker traditional Medicare system may force the US government to become even more aggressive about Medicare secondary payer. In other words, with money running short, the federal government may provide CMS with greater power to make sure primary payers are held responsible for past and future expenses related to an auto, liability, no-fault, or work comp claim. Think about where we were at 30 years ago on MSP compliance- no where! Although a statute existed, there was no mandate, attention, funding, or programming to collect such dollars. Today, we have an amended statute, new regulations, federal and state case law, voluminous administrative policy, and a federal agency that has been provided strength and power to chase primary payers. Imagine how much more they could collect if they got serious about it; really really serious about it.

And to make things even worse, imagine the largest group health insurers which now provide Medicare Advantage coverage to millions of Americans, empowered to do the very same thing as the federal government. Some say we are already there. Some would say that Medicare Advantage plans already enjoy such powers. The fact is they already have statutory authority and regulatory permission to do so. Now imagine statutory authority to do even more, regulatory permission to be even more aggressive. All we seem to be lacking is nation wide case law in all federal circuits indicating that current statutes and regulations do in fact provide Advantage plans with the same rights of recovery as traditional Medicare. With several federal circuits already there, we certainly seem to be on our way.

About Rafael Gonzalez, Esq. 

A dynamic, positive, and experienced corporate leader committed to treating all with kindness, dignity and respect, Rafael Gonzalez, Esq. has over 35 years of experience in the auto, liability, no-fault, and work comp insurance, claims, legal, regulatory, and compliance industry. Always willing to share his vast knowledge and extensive experience with others, he is one of the country’s leading authorities on Medicare and Medicaid secondary payer issues, including mandatory reporting, conditional payments, set aside allocations, approval, and administration, as well as special needs trust formation and administration. Committed to equality, fairness, diversity, and inclusion, he blogs on all social safety net programs, including social security, affordable care, and social determinants of health. Always inspirational, thoughtful, and entertaining, he speaks throughout the country on these substantive issues, teaches these subject matters at his local law/medical schools, and remains engaged in the legislative process at both the state and federal levels on these topics. Grateful and appreciative for his thousands of followers’ trust and confidence, he continues to be very active on social media, including LinkedIn, Twitter, Facebook, Instagram, and YouTube. Rafael can be reached at [email protected] or at 813.967.7598.