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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.

The Budget Control Act of 2011: Implications for Medicare

September 1, 2011

Outlines how the timeline for and process of lowering the federal deficit in exchange for raising the debt ceiling could affect Medicare spending through sequestration, including cuts in payments to Medicare Advantage plans, Part D, and providers.

Quality Ratings of Medicare Advantage Plans: Key Changes in the Health Reform Law and 2010 Enrollment Data

September 9, 2010

Examines performance measures used to set plans' quality ratings, 2010 healthcare reform provisions for bonus payments to plans with high ratings, plan enrollment by rating, and ratings by plan type, analyzed by state and county. Considers implications.

Medicare Advantage 2010 Data Spotlight: Plan Enrollment Patterns and Trends

June 22, 2010

Provides data on nationwide enrollment trends in Medicare Advantage plans by plan type, area, region, and firm or affiliate. Also examines trends in enrollment in group and special needs plans, market concentration, and premiums.

Health Insurance Coverage for Older Adults: Implications of a Medicare Buy-In (Dec 2009)

December 14, 2009

Examines the health insurance status of adults ages 55 to 64, characteristics of the uninsured, their health status, and barriers to affordable coverage. Reviews key features of past Medicare buy-in proposals and their implications for improving coverage.

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.

Health Insurance Coverage for Older Adults: Implications of a Medicare Buy-In (May 2009)

May 13, 2009

Examines the health and insurance status of 55- to 64-year-olds, characteristics of the uninsured, and barriers to affordable coverage. Outlines elements of Medicare buy-in proposals, including eligibility, premiums, and subsidies, and their implications.

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.

Pitching Private Medicare Plans: An Analysis of Medicare Advantage and Prescription Drug Plan Advertising

September 15, 2008

Analyzes television, print, and radio ads for private Medicare plans to assess what types of information insurers emphasize and de-emphasize, what populations they target, and which type of plan they promote in trying to influence beneficiaries' choices.

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.