Medicare Advantage (MA):
Current Status and Future Role
June 28, 2009
AcademyHealth Annual Research Meeting, Chicago, Illinois
Marsha Gold, Sc.D.
Senior Fellow
Where We Are Now

MA enrollees make up almost a quarter of
beneficiaries, adding to Medicare costs.

PFFS disproportionately accounts for growth
(and availability in rural areas).

Many firms compete, but most enrollment is
concentrated within a few firms.

Premiums are attractive, but financial risk
remains.

Beneficiaries are asked to distinguish between
numerous and diverse plans.
1
Medicare Private Plan Enrollment by
Contract Type, 1999–2009
12
10
8.9
8
7.0
6.1
0.6
5.5
0.5
0.36
6
0.2
0.6
0.163
0.6
7.6
0.6
0.86
0.53
1.7
10.3
0.4
10.9
0.4
2.4
2.3
1.0
1.3
Other
0.75
PFFS
Other CCP
4
6.4
4.6
2
5.25
5.8
5.8
2005
2006
2007
6.5
6.8
2008
2009
0
1999
2003
Source: Centers for Medicare & Medicaid Services (CMS) Monthly Summary Report,
December (1999-2008), March 2009.
Note:
“Other” includes 1876 cost plans, 1833 cost plans (HCPPS), PACE, and
demonstrations.
2
HMO
Percentage of Beneficiaries with MA Choice in
Urban and Rural Areas, 1999–2009
Urban Counties
Rural Counties
Source: Mathematica Policy Research (MPR) analysis of publicly available CMS data.
3
Percentage of Beneficiaries by Number of
Firms Competing for MA Business, 2009
Percentage of Beneficiaries
Locally
Competing
Firms
Any
Contract
Type
MA
Contracts
Only
Coordinated
Care Plans
(CCPs) Only
Local CCPs
Only
Local CCPs
Only
(excluding
SNPs)a
Under 5
1%
1%
45%
51%
58%a
5-9
24
30
38
32
24
10-15
53
54
11
11
12
16+
22
16
6
6
5
Source: MPR analysis of CMS data from the contract-county file for March 2009. Excludes
sponsors offering group-only products. CCP = HMO and PPO.
a
Includes 12 percent with no sponsor choice, 12 percent with one choice, 11 percent with two
choices, and 24 percent with three to four choices. SNP=Special Need Plans
4
Distribution of Total MA Enrollment by
Firm or Affiliate, 2009
a
Source: MPR analysis of CMS’s contract-county file for March 2009.
aWellPoint
has a four percent market share, including BC-BS affiliates. (BC-BS has 14.3
percent without WellPoint.)
5
MA-Prescription Drug (PD) Premiums by
Plan Type (Weighted by Enrollment), 2009
Plan Type
Mean Premium
Percentage with
Zero Premium
All MA-PD
$51
50%
HMOs
$42
61%
Local PPOs
$91
21%
PFFS Plans
$64
26%
Regional PPOs
$48
37%
Source: MPR analysis of CMS’s Medicare Options Compare, CMS’s
March 2009 enrollment data.
Note:
Statistics exclude group and SNP plans.
6
Estimated Annual Out-of-Pocket Costs for Hospital and Physician
Services by Plan Type and Enrollee Health Status, 2009
Episodic
Needs
Chronic
Needs
Alla
Healthy
All MA
$441
$149
$838
$1,936
HMOs
$319
$72
$649
$1,603
Local PPOsb
$629
$326
$1,146
$1,961
PFFS
$616
$241
$1,065
$2,678
Regional PPOsb
$978
$456
$1,885
$3,244
Source: MPR analysis of CMS’s Medicare Options Compare data (assumptions of hospital and physician
use are based on HealthMetrix).
Note:
Statistics are enrollment-weighted (March 2009) and exclude group and SNP plans.
aAssumes
a mix of 72 percent healthy, 19 percent with episodic needs, and 9 percent with chronic needs, which
is equal to the distribution of community-residing beneficiaries in good, fair, and poor health.
bAssumes
enrollees’ use of in-network benefits. Includes provider-sponsored plans.
7
Distribution of Beneficiaries by Number of
Individual MA Plans Available, 2009
Source: MPR analysis of CMS data, March 2009.
Note:
Excludes SNP and group plans.
8
Key Influences on the Market

By 2011, MIPPA will require PFFS provider
networks if two or more other plans are available
(nine firms dominate).

Congress will likely address overpayments: half
of enrollees are in plans with bids over 100%
FFS. Congressional Budget Office estimates
show different effects by option, but all reduce
enrollment and limit extra benefits.

CMS’s 2010 Call Letter seeks to limit low
enrollment and duplicative plans.
9
How Might the Market Change

Nine firms dominate PFFS. Some are
withdrawing (Coventry, HealthNet, Wellcare);
others are shifting enrollment to coordinated
care (Humana, Universal America).

Minimum enrollment thresholds would limit
plans with minimal effects on current enrollees.

Experience with Medicare+Choice shows firms
respond slowly, seek relatively less visible
benefit cuts first, and try to maintain lowpremium plans.
10
Issues for Debate

What is the rationale for private plans in
Medicare: choice, market forces, extra benefits,
or innovation?

How important is choice in rural areas?

If financial protection is the issue, should it be
fixed by MA or Medicare?

How can effects of change on beneficiaries be
anticipated and minimized?
11