BY NIRBAN SINGH AND AMY HELBURN

Introduction

Medicare Advantage (Advantage), originally conceived in 1997 during the Clinton Administration as ‘Medicare + Choice’, has progressively grown and become an established health insurance option for those 65 and older. According to data collected and aggregated by the Kaiser Family Foundation, Advantage has more than doubled in total enrollment between 2010 and 2021. In 2021 alone, 26 million people were enrolled in Medicare Advantage, which is over 40% of the total Medicare beneficiary population. In 2021, 85% of Medicare Advantage growth was concentrated among for-profit health plans, with UnitedHealthCare, Centene, and Humana leading the way.

Overall, the Medicare Advantage market is dominated by UnitedHealthCare, Humana, and CVS Health/Aetna, with this trio responsible for over half of all Advantage beneficiaries.As of October 2020, about 80% of Advantage enrollees directly purchased individual policies, while employer-sponsored Advantage enrollment has been steadily growing, comprising 18.1% of the Advantage market overall in 2020. Analysis from The Chartis Group indicates that half of all Medicare beneficiaries will be enrolled in Advantage plans by 2025, so the trio of existing leaders in providing Advantage plans may continue to innovate and profit immensely while new market entrants may grow their footprint rapidly, in response to growing demand.

Understanding the Policy Context

Originally enacted under the G.W. Bush administration in 2003, the Medicare Modernization Act (MMA) renamed Medicare + Choice as Medicare Advantage. This act also offered pharmaceutical drug benefits to Medicare beneficiaries for the first time through Medicare Part D via private, approved health insurers. The legislation cemented the notion that markets can, and should, regulate themselves and the federal government, i.e. CMS, would not be allowed to negotiate drug prices with pharmaceutical companies. As a resulting consequence, senior citizens were thrust into a newly organized Medicare market with private insurers offering HMO plans and managed care arrangements, within various budgetary limitations.

The Bush Administration emphasized that a ‘modernized Medicare’ would spark competitive forces among health insurers, ultimately delivering better forms of care at a lower price point than traditional Medicare. While the bill introduced new coverage options, it also limited members to switching plans only once annually. This condition effectively has dissuaded individuals from being proactive mid-year and discouraging activity outside of open enrollment periods. In 2018, 7 of 10 of Medicare beneficiaries did not compare Medicare plans, and that figure rises about 10-20% among minority, older, and low-income populations. Further, the MMA raised reimbursement rates to private insurers up to traditional Medicare enrollee spending. According to Public Citizen, in 2003, the pharmaceutical industry spent a record $109 million on federal lobbying and hired a record 824 lobbyists. PhRMA, a leading lobbying organization representing numerous brand-name pharmaceutical companies contributed greater than $16 million lobbying for the bill while HMOs and managed care plans themselves spent over $32 million in lobbying in 2003. Individually, the Blue Cross Blue Shield Association spent $8.1 million, while trade associations representing the health insurance industry spent an equivalent amount.

The rapid privatization of Medicare has been frequently attributed to a need for greater efficiency and better care options for senior citizens. However, the rise of Medicare Advantage has created an excess of health insurance options and resulted in economic outcomes that contradict the original rationale for the Bush Administration’s passing of the MMA. The Medicare Modernization Act is a clear-cut example of neoliberalism, a political ideology that favors free-market capitalism that is often espoused and enacted by political conservatives to deregulate industries. G.W. Bush touted the promise of affordability of prescription drugs and the federal government’s commitment to providing older adults with high quality healthcare experiences, all with the underlying intent of privatizing the administration of Medicare, by shifting spending from traditional Medicare to Advantage.

The pharmaceutical industry retained their freedom from pricing restrictions as the MMA restricted any negotiations between Medicare and drug makers. The federal government provided temporary prescription discount cards and offered an additional Medicare Part D plan with annual premiums and deductibles of hundreds of dollars for beneficiaries.If the federal government prioritized reducing patient spending, and could muster the political will, instead of succumbing to industry influence, prescription drug pricing would be capped at the source, and Medicare members would have lower out-of-pocket costs. Subsidizing the cost of prescriptions served as a superficial, short-term response that has subsequently allowed pharmaceutical companies to increase the price of drugs, thus mitigating the intent of federal assistance.

An analysis of Medicare data from 2019 found that Medicare spent $321 more per Advantage enrollee as compared to traditional Medicare, which contributed to an overall increase of about $7 billion in additional spending by the end of that year.Over time, CMS has increased benchmarks for how much capital is necessary to cover Part A and Part B for members, and Advantage plans are receiving higher payments for patients with a higher risk score while these same plans are garnering rebates when they spend less than the established benchmarks. When the Bush Administration conceived the reimbursement structure for Advantage plans, there was a deliberate push towards including provisions that would ensure profitability for the health insurance industry. According to an analysis conducted by the Kaiser Family Foundation, “results indicate that beneficiaries who choose Medicare Advantage have lower Medicare spending – before they enroll in Advantage plans – than similar beneficiaries who remain in traditional Medicare, suggesting that basing payments to plans on the spending of those in traditional Medicare may systematically overestimate expected costs of Medicare Advantage enrollees.”

Neoliberalist practices in various industries hone in on short-term economic practices that may deliver goals temporarily, but eventually falter and cost the public taxpayer and government more than private corporations. With the Medicare Modernization Act, a “conservative” policy dedicated to minimizing the federal budget has cost the Medicare program significantly more than expected, as private health insurance corporations reap growing profits from Advantage members and the government, in the form of CMS reimbursements and rebates.

Health Disparities Created by Advantage

Although Medicare Advantage offers more than traditional Medicare and the individual plans are rated and shared in the form of a quality measurement system, Advantage beneficiaries are suffering from greater health disparities while struggling to understand the true value of additional costs. CMS has constructed and utilized a 5-star rating scale to evaluate health plans on performance, and to provide prospective members with the ability to compare plans with one another. The 5-star scale constructed to asses Advantage plans is comprised of the following  categories: 

1. Access to preventive services
2. Coordination of chronic care and utilization of chronic care services
3. Member satisfaction with the health plan
4. Number of member complaints and difficulties using health services along with member attrition 
5. Quality of call center customer services, ranging from inclusivity to rapid processing.

Advantage plans that receive 4 or 5 stars, generate a significant bonus payment from the federal government, and these payments have been increasing steadily from $3 billion in 2015 and subsequently, nearly quadrupled to $11.6 billion in 2021. Many plans perform exceedingly well, but the impact of the star ratings on root causes of poor health outcomes, such as racial and socioeconomic disparities, have been widely ignored and excluded from payer priorities. 

Researchers at Brown University attempted to elevate this issue by analyzing over 1 million Advantage beneficiaries and re-calculating the star ratings, adjusted for socioeconomic status and race/ethnicity. This study found that top-rated plans had the greatest disparities in health outcomes between low and high socioeconomic status, Black and White members, and Hispanic and White members. Research assessing hospital readmission rates among Medicare enrollees quantifies the stark differences among those with Advantage plans. Black patients with traditional Medicare were 33% more likely to be readmitted within 30 days as compared to their White counterparts, whereas Black patients with Medicare Advantage were 64% more likely to be readmitted as compared to White patients.

Not only has quality of care been an area of concern for Medicare Advantage plans, but cost, one of the most debilitating barriers to healthcare, has surfaced as a challenge for individuals of color. When analyzing the entire sample pool, and by each individual racial category,  more Medicare Advantage beneficiaries report cost-related problems, as compared to traditional Medicare. The Kaiser Family Foundation reported that 15% of traditional Medicare beneficiaries faced cost-related challenges as compared to 19% Advantage enrollees. Segmenting the data into racial categories found that 32% of Black Advantage beneficiaries reported a cost-related problem as compared to 19% of their White counterparts. People of color already suffer tremendously as a result of biases deeply entrenched in the healthcare system, in terms of poor health outcomes and cost barriers. Medicare Advantage has been shown to heighten disparities by facilitating inequitable care models that do not deliver the same value to each person, regardless of race or socioeconomic status.

Concluding Commentary

Medicare Advantage has incredible potential to contain healthcare costs and drive seniors towards greater utilization of preventive health services, but currently poses one of the greatest challenges to cost-effectiveness and equity in the U.S. healthcare system. Medicare, a program once ideated to create equity among all adults over the age of 65 is well on the path to privatization, as well as preferential treatment. When enacting the Medicare Modernization Act, President George W. Bush espoused the benefits of providing senior citizens with more private health insurance plan options and driving down Medicare spending, but the opposite has occurred. 

The proliferation of Medicare Advantage plan options has led to confusion, as vulnerable populations such as the elderly may have lower levels of health literacy and encounter greater difficulties in navigating these options. Unfortunately, we, the authors of this article, have experienced this first-hand with our own elderly relatives, fielding their questions on the benefits of Medicare Advantage versus traditional Medicare and witnessing their difficulty in understanding complex insurance billing. With the limited familiarity of rapidly evolving technology and a range of health conditions, navigating the health insurance market is simply draining and frustrating for many of our nation’s senior citizens.

Champions of Medicare Advantage tout greater health outcomes overall, but that ideology is flawed because the wealthiest seniors, a population that can afford high premiums and deductibles associated with Medicare Advantage, maintain a higher level of health. Advantage affords greater access and quality of care for those privileged by social class and racial category. It is truly an ‘advantage’ for some, to the exclusion of those with little to no socio-political capital to advocate for themselves.

A core concern lies with the star rating system, which is intended to reflect the quality of Advantage health insurance plans and associated healthcare quality, along with beneficiary satisfaction. Star ratings are currently awarded without a deliberate focus on the core drivers of poor healthcare outcomes and experiences, ultimately perpetuating long-term care gaps that may never be reconciled. CMS should incentivize health insurers to promote Advantage plans more equitably among eligible individuals – to address disparities in health outcomes among Advantage beneficiaries and mitigate persistent disparities in health care access and quality, likely to further disenfranchise vulnerable populations and drive higher tertiary care costs. To contain costs and promote the wellbeing of Advantage and traditional Medicare beneficiaries alike, healthcare stakeholders need to advocate for, and funnel future investments into population health improvement measures. Such measures can complement the 5-star quality ratings, to provide broader contextual insights and a more substantive feedback loop for beneficiaries, providers, researchers and policy-makers. 

Nirban Singh is an MPH student at Northeastern University with a passion for investigating the role of health policy in creating equitable outcomes.

Professor Amy Helburn, PhD, MPH of Northeastern University conducts applied health policy research for federal and philanthropic clients.