Medicare Advantage (MA) has experienced substantial growth, with many beneficiaries shifting from traditional Medicare to MA plans, especially since 2019. This trend, driven by younger and healthier individuals, has significantly increased MA enrollment, rising from 16% in 2006 to 43% in 2022 among those turning 65. However, concerns about risk adjustment and cost implications arise as MA continues to expand. Demographic variations in switching patterns and reasons for transitions remain a subject of interest for future research.
Beneficiaries switching from regular Medicare to Medicare Advantage (MA) is the main cause of the substantial expansion seen in MA over the past 20 years. According to a study that was published in Health Affairs, this behavior has been more prevalent recently.
The study, conducted by researchers from the Department of Health and Human Services, emphasizes that the shift from fee-for-service Medicare to MA, especially among younger and healthier beneficiaries, has been a driving force behind the increasing enrollment in MA. This transition has been on the rise since 2019, thanks in part to the availability of more recent and detailed data that enabled a thorough analysis of switching patterns between MA beneficiaries and those enrolled in traditional Medicare.
Steven Sheingold, Ph.D., the director of HHS’ division of healthcare financing policy and a co-author of the study, explained that their research aimed to investigate whether new beneficiaries turning 65 were predominantly choosing Medicare Advantage, thus contributing to its growth. Surprisingly, this hypothesis was validated. In 2006, only 16% of those turning 65 opted for Medicare Advantage, while by 2022, this figure had surged to 43%.
The study’s findings align with extensive data highlighting the substantial expansion of MA over the past two decades. The number of beneficiaries transitioning from fee-for-service Medicare to MA more than tripled between 2006 and 2022, while the reverse transition from MA to traditional Medicare decreased.
Notably, the rate of these transitions in both directions accelerated after 2019. The study revealed that the proportion of MA enrollees who switched from traditional Medicare rose from 61% in 2011 to 80% in 2022.
Moreover, the study identified specific beneficiary groups with higher odds of switching in both directions, including Black, dual-eligible, and disabled beneficiaries. Conversely, younger and healthier beneficiaries were more likely to switch from fee-for-service Medicare to MA but less likely to switch from MA to fee-for-service Medicare.
Partial dual-eligible beneficiaries were even more inclined than fully dual-eligible individuals to make this transition, possibly viewing Medicare Advantage as a way to mitigate potential out-of-pocket expenses.
The study utilized data from the Centers for Medicare & Medicaid Services (CMS) to track the annual enrollment of beneficiaries in MA, categorizing them based on eligibility status and transition patterns. It also examined demographic characteristics to understand MA growth in various subcategories.
Paul B. Ginsburg, Ph.D., a professor at the University of Southern California, emphasized that the rapid growth of MA, fueled by switching, has highlighted the need for CMS to address the issue of inadequate risk adjustment, which could potentially cost the federal government, taxpayers, and Part B premium-paying beneficiaries significant amounts of money.
Ginsburg cited two studies published in June that advocated for urgent reform of the MA payment system due to overpayments, projecting potentially over $75 billion in 2023, or 20%. The Medicare Payment Advisory Commission also highlighted the inadequacy of the model in adjusting for differences in expected health spending between switchers and stayers.
The study did not delve into the underlying reasons for switching, which could range from lower premiums or enhanced services offered by MA plans to aggressive marketing campaigns by these plans. Involuntary factors prompting switching, such as beneficiaries relocating, were also not explored. Additionally, the study measured MA enrollment by comparing rates from December one year to December the next, without examining potential month-to-month variations. However, such scenarios represented only a small percentage of beneficiaries who turned 65 in 2022. Further analysis in 2022 focused on the demographic and health characteristics of switchers, considering monthly transitions and qualifying events like aging into Medicare or experiencing changes in health insurance status.
