The headlong growth in Medicare Advantage, the privatized version of the traditional Medicare program for older and disabled adults, has slowed, even as the prices paid to Medicare Advantage insurers have risen.
“With more than half of Medicare-eligible individuals in Medicare Advantage plans, the market grew by 1.3 million (+3.9%),” a recent report from the analytics firm Chartis said. “This slow-down from the previous year’s growth of 2.2 million (+7.0%) continues the trend of tempered growth compared to the first few years of the decade.”
“As health plan leaders look ahead, the forecast for Medicare Advantage points to continued growth and favorable economics compared to other market segments,” the report added “Additionally, the new Trump Administration has signaled support for the program, and less administrative burden is expected for plans. However, health plans must first address challenges around financial performance and sustainability to position themselves for this long-term growth potential.”
Payment increase
The report was issued earlier this spring, before the Trump administration gave Medicare Advantage plans a hefty price increase last week. The The 5.06% average increase in payments was more than double what the government proposed in January. Analysts said it represents support from the Trump administration, heralding possibly even better days ahead.
The increase, announced on April 7, was behind a strong surge in prices for insurers on Tuesday, during a chaotic week of market movement governed by the Trump trade policies. Humana’s stock was up 16 percent, while UnitedHealthcare, Centene and CVSHealth were up by 5 to 10 percnt, Reuters reported.
Problems in the sector include a post-Covid rise in demand for medical procedures, which drove up costs. Also several insurers announced that they would cut enrollees or exit markets. “In response to challenging market conditions and financial pressure, several plans exited the MA market (e.g., Premera, Blue Cross Blue Shield Kansas City, Care N’ Care), others reduced their service area or terminated plans (e.g., Aetna, Humana), and 60% of plans weakened benefit offerings,” Chartis said. “In markets where Blues plans1 exited, growth from the market disruption appears to have largely accrued to United.”
Overpayments and denials
The increase in payments to Medicare Advantage was a surprise to some market observers, who point out that Medicare Advantage costs much more than traditional Medicare — so if cost-cutting were really in the plan, then the Advantage plans would not be so richly rewarded. “Medicare dis-Advantage: Overpayments and inequity” is the title of a Nation analysis of this topic.
Another analysis by a former industry insider turned whistleblower is the focus of this piece, “Private health care companies are eating the American economy,” from The American Prospect.
It is also true that a string of investigative reports from The New York Times and others have pointed out how Medicare Advantage insurers game the system to make sure they get paid more. An article titled “The cash monster was Iinsatiable’: How insurers exploited Medicare for billions,” detailed the ways the Advantage insurers work this problem.
Prior authorization has caused numerous problems for Medicare Advantage enrollees, who receive denials for care their doctors recommend. Insurers say prior authorization encourages the best kind of care, while patients and doctors say denials are simply a way for the insurers to save money.
