Medicare Advantage 2014 Spotlight: Enrollment Market Update

Medicare Advantage enrollment continues to grow despite concerns that payment rate changes incorporated in the ACA will lead to a drop in enrollment, and a significant reduction in benefits.  Enrollment trends suggest that Medicare Advantage remains an attractive option for a growing number of beneficiaries. Despite some turnover in the composition of available plans, beneficiaries continue to have many choices and the share of beneficiaries enrolled in Medicare Advantage continues to grow in virtually all states, suggesting that the market currently has sufficient choice to attract enrollees.  Our analysis also shows that premiums paid by enrollees have remained fairly flat, with the average premium ($35 per month) the same as it was in 2012 and 2013.

Looking to the future, it is not clear if or how plans will modify their offerings, nor what the effect will be for beneficiaries.  Thus far, there hasn’t been much of a change in the Medicare Advantage market, other than the increase in out-of-pocket limits and reports in the media that some insurers have scaled back provider networks.  As payment reductions continue to be phased in, insurers may reduce the extra benefits they now offer, though they will still be required to provide benefits that are at least equivalent to those that are offered under traditional Medicare, in conjunction with a limit on out-of-pocket spending.  Insurers will need to balance their interest in maintaining market share (and remain attractive to beneficiaries) against their ongoing interest in operating as profitably as possible.

Ultimately the form of both the overall Medicare program and Medicare Advantage will be shaped by the policy and fiscal climate. There are very different perspectives on the kinds of protections Medicare needs to provide for seniors and younger enrollees with disabilities, the appropriate level of Medicare spending and how to finance it, and how Medicare benefits should be provided.  This larger context, and its relevance to the long term stability of the Medicare program, warrants explicit consideration as part of the debate on Medicare Advantage payment.