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Higher and Faster Growing Spending Per Medicare Advantage Enrollee Adds to Medicare's Solvency and Affordability Challenges

August 17, 2021

The number of people enrolled in Medicare has increased steadily in recent years, and along with it, Medicare spending. In particular, enrollment in Medicare Advantage, the private plan alternative to traditional Medicare, has more than doubled over the last decade. Notably, Medicare spending is higher and growing faster per person for beneficiaries in Medicare Advantage than in traditional Medicare. As enrollment in Medicare Advantage continues to grow, these trends have important implications for total Medicare spending, and costs incurred by beneficiaries. In its 2022 budget, the Biden Administration expressed support for reforming payments to private plans as part of efforts to extend the solvency of the Medicare Hospital Insurance (HI) Trust Fund and improve affordability for beneficiaries.This analysis examines Medicare spending per person for beneficiaries in Medicare Advantage, relative to traditional Medicare. We build on prior work published by the Medicare Payment Advisory Commission (MedPAC) and the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT) to provide estimates of the amount Medicare would have spent for Medicare Advantage enrollees had they been covered under traditional Medicare in 2019 (the most recent year for which data are available). We use publicly available data from CMS that includes spending for people who were enrolled in both Part A and Part B of traditional Medicare, by category of service, as well as information on average risk scores and enrollment by county. This allows us to calculate per-person spending for beneficiaries in traditional Medicare on a basis comparable to federal payments per enrollee in Medicare Advantage. We also examine the extent to which the projected growth in Medicare Advantage spending is attributable to the growth in enrollment and the increase in spending per person. We then illustrate potential savings to the Medicare program between 2021 and 2029 under two alternative scenarios where Medicare Advantage spending per person is lower or grows slower than under current projections.

Key Issues in Understanding the Economic and Health Security of Current and Future Generations of Seniors

April 10, 2012

Examines key issues seniors face in ensuring economic and health security and the role that Medicare, Medicaid, and Social Security play in ensuring seniors' financial security, including concerns about medical debt and disparities by race/ethnicity.

Restructuring Medicare's Benefit Design: Implications for Beneficiaries and Spending

November 15, 2011

Estimates the effects of options for restructuring Medicare's fee-for-service benefit design, including a $550 deductible for Parts A and B, a 20 percent coinsurance on nearly all services, and a $5,500 limit on cost sharing for Medicare-covered services.

Living Close to the Edge: Financial Challenges and Tradeoffs for People on Medicare

June 28, 2011

Profiles the choices and trade-offs Medicare beneficiaries make to cover expenses with limited financial resources, including cutting back on basics and relying on credit cards or help from family, and the effects on medical debts and access to care.

To Hospitalize or Not to Hospitalize? Medical Care for Long-Term Care Facility Residents

October 12, 2010

Examines factors behind frequent hospitalizations of long-term care facility residents, such as limited capacity, physician preferences, and financial incentives. Suggestions include support and training, advanced care planning, and changes in thinking.

The Social Security COLA and Medicare Part B Premium: Questions, Answers, and Issues

May 27, 2009

Estimates the impact of the projected percent cost-of-living adjustment (COLA) for Social Security payments in 2010-11 on beneficiaries subject to increased premium payments for Medicare Part B. Outlines implications under several legislative scenarios.

Revisiting 'Skin in the Game' Among Medicare Beneficiaries: An Updated Analysis of the Increasing Financial Burden of Health Care Spending From 1997 to 2005

February 5, 2009

Presents data on the out-of-pocket expenses of Medicare beneficiaries as a share of income, analyzed by insurance status, region, and various demographics, as well as spending percentile. Breaks down out-of-pocket spending into eight categories.

The Medicare Part D Coverage Gap: Costs and Consequences in 2007

August 21, 2008

Analyzes data on Medicare Part D enrollees who reached the coverage gap and had to pay the full cost until they qualified for catastrophic coverage, who then stopped taking their medications or bought cheaper ones, and who received catastrophic coverage.

Examining Sources of Coverage Among Medicare Beneficiaries: Supplemental Insurance, Medicare Advantage, and Prescription Drug Coverage

August 4, 2008

Provides 2006 data on Medicare enrollees' supplemental and drug coverage. Compares traits of Medicare Advantage enrollees to those of fee-for-service Medicare enrollees, and examines drug coverage and subsidy status among low-income beneficiaries.

Medicare Prescription Drug Plans in 2008 and Key Changes Since 2006: Summary of Findings

April 1, 2008

Synthesizes findings from prior research on the scope and generosity of drug coverage under Medicare Part D, as well as on changes in drug coverage and costs since 2006. Looks at premiums, the coverage gap, tiered cost-sharing, and utilization management.

The Burden of Out-of-Pocket Health Spending Among Older Versus Younger Adults: Analysis from the Consumer Expenditure Survey, 1998-2003

September 1, 2007

Analyzes the extent to which health care spending as a share of income has differed among younger adults versus people ages 65 and older, both at a single point in time (2003) and over the six-year period from 1998 to 2003.

An In-Depth Examination of Formularies and Other Features of Medicare Drug Plans

April 1, 2006

Provides a detailed assessment of the formularies, drug costs, and utilization management tools offered by the fourteen nationwide organizations that account for most of the stand-alone prescription drug plans.