Medicare Advantage:
Background and Current Status
by
Marsha Gold, Sc.D.
Senior Fellow
Mathematica Policy Research, Inc.
May 4, 2008
Presented at Alliance for Health Reform Briefing
Origins of Medicare Advantage

TEFRA of 1982 (effective 1985): Medicare Risk
Contracting (HMO) Program

BBA of 1997: Medicare+Choice (additional local
coordinated care choices, PFFS, rate floors and
other changes); subsequent refinements (BIPA
and others)

MMA of 2003: immediate payment changes
(increases) 2004-2005, SNPs

MMA of 2003 (effective 2006): Part D, regional
PPOs, MSAs, payment benchmarks
1
Medicare Private Plan Enrollment by
Contract Type, 1999–2009
12
10.3
10
8.9
7.6
8
7.0
0.6
6
6.1
5.5
0.5
0.36
0.2
0.6
0.163
0.6
0.6
0.86
0.53
1.7
10.9
0.4
0.4
2.4
2.3
1.0
1.3
0.75
Other
PFFS
Other CCP
HMO
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: CMS Monthly Summary Report, December various years; March for 2009.
Note:
“Other” include 1876 cost plans, 1833 cost plans (HCPPS), PACE and demonstrations.
2
Percentage of Beneficiaries with MA
Choice in Urban and Rural Areas,
1999-2009
Urban Counties
Rural Counties
Source: MPR analysis of publicly available CMS data.
3
Percentage of Beneficiaries by Number of
Firms Competing for MA Business, 2009
Percent of Beneficiaries
Locally
Competing
Firms
Under 5
Any Contract
Type
1%
MA Contracts
Only
CCPs Only
1%
Local CCPs
Only
Local CCPs
Only (excluding
SNPs)a
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
aIncludes
12 percent with no choice, 12 percent with 1 sponsor choice, 11 percent with 2 choices, and
24 percent with 3-4 choices.
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 4 percent market share including BC-BS affiliates. (BC-BS has 14.3 percent without WellPoint.)
5
MA-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 Physicians Services Differ 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. Uses assumptions of hospital and physician use
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.
Note:
Excludes SNP and group plans.
8
Where We Are Now

MA enrollment now almost a quarter of
beneficiaries and adds to Medicare costs

PFFS disporportionately accounts for growth (and
availability in rural areas)
 Many firms compete but most enrollment
concentrated in a few

Premiums are attractive but financial risk remains
 Beneficiaries asked to distinguish numerous and
diverse plans.
9