Dennis Scanlon, PhD, professor of health policy and administration at the Pennsylvania State University, discusses how extra benefit coverage and the choice to shop for plan options are some factors driving Medicare Advantage (MA) program growth.
The option to shop for Medicare Advantage plans and its expansion of coverage for services like dental, vision, and fitness memberships both contribute to its growth, says Dennis Scanlon, PhD, professor of health policy and administration, Pennsylvania State University.
As the Medicare Advantage program grows, how is it reshaping the Medicare program?
When we talk about the growth of Medicare Advantage, I think it's important, as it grows, presumably something [else] does not grow, right? In the broader context of Medicare, we have traditional, what we'll call “fee-for-service Medicare,” and then we have Medicare Advantage plans. Actually, the growth of Medicare Advantage plans has been quite significant for some period of time, it's just been an upward trend. I believe in 2007, it was roughly maybe 12% or so of the Medicare-eligible population that was in a Medicare Advantage plan. Now, in 2022, or 2023, it's almost half at about 48%. If you look at the total dollars expended in the Medicare program, I believe Kaiser Family Foundation estimates that it's about 55% of all Medicare spending. So clearly, there's been a growth trend.
A question is, what's driving that? Why are Medicare beneficiaries choosing to enroll in Medicare Advantage plans when, if you go all the way back to those early parts of the 2000s, many people thought that Medicare Advantage plans were an inferior option relative to traditional Medicare? I think a number of reasons. One is Medicare Advantage plans are allowed to cover extra benefits. There are things like dental, vision, pharmaceutical coverage, fitness memberships, and a lot of different things like that, that within the provisions of the rules and the reimbursement around Medicare Advantage are offered to beneficiaries, and so those become quite popular. I think the other thing is that there's a lot more plans being offered in this space, and they're marketing their plans, they're out there in communities. On average, across the country, Medicare beneficiaries have about 43 plans that they can choose from, which actually creates a little bit of a cognitive challenge, when you're looking at an option and to process, on average, 43 different options and to understand the differences between them. Nonetheless, we've seen that enrollment continue.
To get to the crux of your question: How is it reshaping the Medicare program? I think it's reshaping it quite significantly. And I guess I would say this: Clearly, Medicare beneficiaries seem to be more comfortable enrolling in these options. A lot of these options are tied to specific provider networks, not always exclusively, but many of the Medicare Advantage programs are HMOs [health maintenance organizations] or they’re PPOs [preferred provider organizations]. If they don't have exclusive networks, they have, in some cases, preferred networks, or at least there's variation across networks. Again, [they have] those other benefits, which are attractive.
I guess what I would say is [Medicare Advantage] is probably in some ways taking the shopping component of consumerism in health care and putting Medicare beneficiaries in that game, which some people think ultimately will be a better thing in terms of driving competition and more efficiency. With that, I think, also become concerns about variation and differentiation among these products. Can you differentiate that your members are happier? Can you differentiate that, as a plan, your members are getting better quality care or having better outcomes? It really truly is reshaping [Medicare], whereas the traditional fee-for-service program is: everyone went out and sought the care that they sought, and that was reimbursed often with those, I think it was, A through J supplemental plans that people purchased as well.
The growth has been phenomenal. I guess the question is, how much further will it grow from roughly 50% of the population forward? The last thing I would say is, I think some people believe that the Medicare Advantage plans are better able to implement some of the value-based principles that CMMI [Center for Medicare and Medicaid Innovation] and CMS have been supportive of. A lot of that is around relationships with providers for taking care of populations and thinking about risk opportunities, whether it's shared risk, whether it's upside risk, but ultimately accountability for the cost of care and the quality of care for the Medicare population.