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Medicare Advantage Plans Provide No Substantial Cost Savings Over Traditional Medicare

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Beneficiaries who switched from traditional Medicare to a Medicare Advantage plan experienced no additional protection from medical costs compared with those who stayed in a traditional Medicare plan.

Medicare Advantage (MA) plans do not necessarily lead to cost savings for beneficiaries, especially those who are from vulnerable populations, according to a new study published in Annals of Internal Medicine.1

In recent years, the popularity of MA plans has grown significantly from just 15% of eligible beneficiaries being enrolled in an MA plan in 2011 to more than half (51%) in 2023.2,3 In addition, 95.3% of employer-sponsored insurance enrollees are covered by an insurer offering MA in their state in 2021, which was up from 83.5% in 2015.4

Stack of wood blocks with insurance and health care icons | Image credit: A stockphoto - stock.adobe.com

Over the last 2 decades, enrollment in Medicare Advantage has grown substantially due to the additional benefits available to enrollees.

Image credit: A stockphoto - stock.adobe.com

Beneficiaries are choosing these plans because they are allowed to cover extra benefits, like dental, vision, and more, explained Dennis Scanlon, PhD, professor of health policy and administration, Pennsylvania State University.5 However, despite the popularity, there are concerns about these plans. The Medicare Payment Advisory Commission (MedPAC) reported at the end of 2023 that Medicare’s payments to MA plans were projected to be $27 billion more in 2023 than if all MA enrollees were in fee-for-service Medicare.6 The March 2024 report from MedPAC to Congress estimated that Medicare’s payments to MA plans are projected to be $83 billion higher than if those beneficiaries were enrolled in traditional Medicare.7

MA plans not only offer a wider range of benefits, but they are required to have limits on out-of-pocket spending, making it even more attractive to beneficiaries.1

While one report found patients with type 2 diabetes had better outcomes when they were enrolled in MA compared with patients in traditional Medicare,8 another analysis found patients with cancer in MA are more likely to be admitted in hospitals with physicians who have less experience performing complicated surgeries compared with traditional Medicare enrollees, and the MA enrollees are more likely to die within 30 days after the removal of their liver, pancreas, or stomach.9 Additional research found patients on MA received shorter and less intensive home health care compared with patients on traditional Medicare even if they had similar needs.10

In the new study, researchers from Korea University and Brown University studied data from the Medical Expenditure Panel Survey to understand the financial burden of care for patients switching from traditional Medicare to MA.1 The study sample included 8598 Medicare beneficiaries, with 7054 (80.2%) remaining in traditional Medicare and 1544 (18.0%) switching to an MA plan in year 2. Propensity score–based weights were applied to mitigate the differences between the baseline characteristics of these 2 groups.

Beneficiaries who switched to MA had similar costs to those who stayed in traditional Medicare. There were small between-group differences in change over time for the people who switched compared with those who stayed in traditional Medicare for:

  • Out-of-pocket spending: $168 (95% CI, –133 to 469)
  • Cost sharing: 0.2 percentage point (95% CI, –1.3 to 1.5)
  • High financial burden: 0.3 percentage point (95% CI, –2.5 to 3.0)
  • Catastrophic financial burden: 0.7 percentage point (95% CI, –0.1 to 1.6)
  • Families reporting paying medical bills over time: –0.2 percentage point (95% CI, –1.7 to 1.4)
  • Families having problems paying medical bills: –0.4 percentage point (95% CI, –2.7 to 1.8)
  • Families reporting being unable to pay medical bills: 0.4 percentage point (95% CI, –1.3 to 2.0).

However, persons in racial and ethnic minority groups and those with family incomes between 200% of the federal poverty line (FPL) had higher point estimates for the changes in out-of-pocket spending and for high and catastrophic financial burden compared with White beneficiaries and those with family incomes above 200% of the FPL.

“Our findings contrast with the notion that MA’s apparently more generous health insurance benefits lead to financial savings for enrollees,” the authors noted.

There were several limitations of the study, including the incomplete balancing on out-of-pocket costs and residual confounding. In addition, the 2-year data limits the findings to the short term, and the study does not take into account variation across MA plans.

In an accompanying editorial, authors from City University of New York and Hunter College suggest that MA has not only been costly for taxpayers but has offered little benefit to the enrollees.11 The authors also suggest that beneficiaries are being lured to MA with false promises of more benefits for less cost. They conjecture that the reason MA beneficiaries were no better insulated from medical costs is that “MA insurers have structured their benefits to advantage low-cost (that is, profitable) enrollees and disadvantage those requiring expensive care.”

For patients needing inexpensive medications, the Part D drug coverage is advantageous, but the same can’t be said for patients needing expensive chemotherapies, they wrote. Furthermore, insurers are reaping financial benefits.

“Redeploying MA overpayments to improve [traditional Medicare] coverage would better serve seniors and impede the accretion of medical resources by investors whose profit seeking too often overrides patient care priorities,” they concluded.

References

1. Park S, Meyers DJ, Trivedi AN. Association of Medicare Advantage enrollment with financial burden of care: a retrospective cohort study. Ann Intern Med. Published online June 24, 2024.

2. Henke RM, Fingar KR, Liang L, Jiang HJ. Medicare Advantage in rural areas: implications for hospital sustainability. Am J Manag Care. 2023;29(11):594-600. doi:10.37765/ajmc.2023.89455

3. Ochieng N, Biniek JF, Freed M, Damico A, Neuman T. Medicare Advantage in 2023: enrollment update and key trends. KFF. August 9, 2023. Accessed December 14, 2023. https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2023-enrollment-update-and-key-trends/

4. Marr J. Meiselbach MK, Polsky D. Trends in Medicare Advantage participation among commercial insurers. Am J Manag Care. 2023;29(10):e317-e319. doi:10.37765/ajmc.2023.89446

5. Petrullo J. Dr Dennis Scanlon discusses what to be aware of as Medicare Advantage programs grow. AJMC®. February 26, 2023. Accessed June 21, 2024. https://www.ajmc.com/view/dr-dennis-scanlon-discusses-what-to-be-aware-of-as-medicare-advantage-programs-grow

6. The Medicare Advantage program: status report. In: Report to the Congress: Medicare Payment Policy. Medicare Payment Advisory Commission; 2023:319-380. Accessed December 14, 2023. https://www.medpac.gov/wp-content/uploads/2023/03/Ch11_Mar23_MedPAC_Report_To_Congress_SEC.pdf

7. The Medicare Advantage program: status report. In: Report to the Congress: Medicare Payment Policy. Medicare Payment Advisory Commission. March 2024:357-342. https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_MedPAC_Report_To_Congress_SEC.pdf

8. Klein H. Diabetes outcomes better for patients enrolled in MA than FFS Medicare. AJMC. January 20, 2023. Accessed June 21, 2024. https://www.ajmc.com/view/diabetes-outcomes-better-for-patients-enrolled-in-ma-than-ffs-medicare

9. Klein H. MA beneficiaries may be at disadvantage for complex cancer surgeries. AJMC. November 21, 2022. Accessed June 21, 2024. https://www.ajmc.com/view/ma-beneficiaries-may-be-at-disadvantage-for-complex-cancer-surgeries

10. Bonavitacola J. Patients on Medicare Advantage receive shorter, less intensive home health care. AJMC. March 6, 2024. Accessed June 21, 2024. https://www.ajmc.com/view/patients-on-medicare-advantage-receive-shorter-less-intensive-home-health-care

11. Woolhandler S, Himmelstein DU. Medicare Advantage: high costs and poor protection. Ann Intern Med. Published online June 24, 2024.

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