Medicare Spent an Average of 27% More on People Who Switched from Medicare Advantage to Traditional Medicare Compared to Those Who Were Only in Traditional Medicare

A new KFF analysis finds higher Medicare spending among people who switched from Medicare Advantage to traditional Medicare than for similar beneficiaries who were in traditional Medicare all along.

Medicare spent an average of 27% more on such beneficiaries, according to the analysis, which examined health costs in traditional Medicare for both groups in the year following the switch, after adjusting for differences in health status and other characteristics. This amounts to a difference of $2,585 in Medicare spending per person, on average, between the two groups in 2022. The difference in spending among people with certain health conditions varied from 15% for those with pneumonia to 34% for people with diabetes.  

The higher Medicare spending among beneficiaries who disenrolled from Medicare Advantage compared to similar beneficiaries in traditional Medicare was due to skilled nursing facility spending (34%), followed by outpatient hospital spending (23%), and inpatient hospital spending (20%), with some variation by chronic conditions and other beneficiary characteristics. 

In 2024, more than half of all eligible Medicare beneficiaries were enrolled in a Medicare Advantage plan. Other research has found that people who use relatively more health care services are less likely to sign up for one of the private plans and more likely to choose traditional Medicare.  

The higher Medicare spending among people who disenrolled from Medicare Advantage for traditional Medicare raises several questions, including whether such switchers were unable to get the medical care they felt they needed while enrolled in a Medicare Advantage plan; whether more Medicare Advantage enrollees would make the switch if people with pre-existing conditions did not face barriers to purchasing Medicare supplemental insurance (Medigap); and whether the disenrollments reduce costs and increase profits for Medicare Advantage insurers, and increase Medicare spending. 

The analysis also drills down to examine differences in Medicare spending between switchers and those who were continuously covered by traditional Medicare by health condition, age, race and ethnicity, and dual eligible status.

For the full analysis and other data and analyses about Medicare Advantage, visit kff.org.