The past few years have seen unprecedented enrollment growth in Medicare Advantage, with enrollment exceeding 50% of the eligible population in 2023. This growth has been fueled by a rapidly increasing senior segment and an enabling regulatory environment.??
While growth in 2023 remained strong, it was slower than in years past. What’s more, conflicting trends converging on Medicare Advantage organizations may result in more tempered growth going forward.?
- The big keep getting bigger. Half of Medicare-eligible individuals are now in Medicare Advantage plans. The market grew by 1.7 million beneficiaries (+5.4%), slowing down from the previous year’s record growth of 2.7 million (+9.4%). Notably, for-profit carriers like United, Humana, and CVS/Aetna collectively captured 1.4 million new members: 86% of the total market’s growth. By contrast, many Blues and nonprofit plans that serve this market continue to be left behind as market growth exceeds their enrollment gains. ?
- Special Needs Plan (SNP) enrollment is skyrocketing. SNPs added 1.2 million members in 2023. Nearly 7 in 10 new Medicare Advantage enrollees opted for SNPs. This growth is particularly pronounced in Chronic Condition SNPs (C-SNPs). The top 5 plans now represent 77% of the SNP market.? ?
- Plan options have plateaued. The number of plan options in 2023 were 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.? ?
- Social vulnerability and quality play a role. Medicare Advantage enrollment and social vulnerability are related. 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 approximately one-quarter of beneficiaries are enrolled in a plan with fewer than four stars.?
- Plan executives remain optimistic about market outlook. Health plans face recent market challenges, including declining payment rates, growing medical cost pressures, and an expanding regulatory burden. But 79% of plan executives express optimism about the next five years, expecting neutral or positive overall outcomes. 84% anticipate membership growth equal to or greater than the current year, indicating confidence in the stability and growth potential of the market.?
The report authors note that they anticipate Medicare Advantage growth will persist as the population continues to age and consumers are attracted to these plans over Original Medicare. But they also highlight that they expect headwinds to cloud the outlook on this market beginning in the 2025 plan year.?
For health plans, continued competition, slowing growth, revenue cuts, and regulatory scrutiny may impact market opportunity. To succeed in this environment, health plan executives should consider these strategies:??
- Create sustainable growth and performance. Striking the right balance of growth and sustainability will require plans to deploy a performance improvement strategy that incorporates underlying program economics, key revenue and cost levers, and a strategic focus on growth. Plans should target growth where they have a “right to win” across distribution channels, Medicare Advantage member segments, and geographic markets. Sustainable performance must also account for the impacts of regulatory changes on network providers, such as their level of risk assumption and contracting arrangements.? ?
- Cultivate engagement and retention. Plans will increasingly need to focus on member engagement to ensure retention. These efforts must begin from initial onboarding and continue with strategic touchpoints across the member journey (informed by member needs and health status). Retention will be critical for return on investment as plans realize improvement efforts related to risk adjustment, star ratings, and medical cost management.? ?
- Pursue diversification and flanking. In the face of the competitive individual and Dual-Eligible SNP markets, plans should consider “flanking” strategies that will allow them to tap adjacent and new local markets. Economics of these adjacent markets (e.g., Chronic Condition SNPs and veteran- and military-focused plans) can create greater opportunity for favorable margins when the products are well managed.?
With so much industry and consumer investment in Medicare Advantage, stakeholders must carefully consider the market dynamics and challenges as they seek to support the unique needs of this market. Adapting their strategies in the increasingly complex and competitive landscape will be essential for ongoing success.?
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