Brandon Dunk and Nafisa Ali

MedSupp coverage is as comprehensive as you can get—for the not-so-low cost of a monthly premium, qualifying seniors can see any doctor they want as often as they need, no questions asked. That’s a great value proposition for all seniors—but especially high utilizers with preexisting conditions who know they’ll need frequent care in the future.

With the expansion of birthday rule states, more seniors today can skip underwriting and access everything MedSupp has to offer. However, this makes it harder for MedSupp carriers to separate high utilizers from other seniors, thus raising premiums for all to account for the added risk.

So how healthy is the MedSupp pool today? Are individuals with the greatest utilization needs overindexing into MedSupp?
To answer these questions, we reviewed some of the Medicare Advantage and MedSupp beneficiary data in Deft’s Medicare Shopping and Switching Study. As the industry-leading market research report on Medicare consumers for over a decade, the Medicare Shopping and Switching Study provides a comprehensive picture of the Medicare industry and what seniors look for in their plan choices. The study includes detailed data on the health of respondents, measured by their prescription drug use, number of conditions, and self-rated health. The data excludes SNP and EGWP MA members—this helps ensure a more fair comparison between MA and MedSupp.

Overall, MedSupp members are relatively healthy. In the 2024 Medicare Shopping and Switching Study data, MA and MedSupp seniors provided similar scores when asked to rate their overall health. However, differences emerged in the details. More MedSupp participants indicated no regular prescription drug use compared to MA participants. And when it came to high utilization, fewer MedSupp seniors reported taking more than six prescriptions or having more than five conditions.
Despite offering more comprehensive coverage, and despite the longtime “consensus” that MA attracts healthier seniors at the expense of Original Medicare and MedSupp, MedSupp may be more frequently used by healthier individuals than traditional MA.
Is this a new shift, or has it always been this way? To answer this, we also reviewed data from the 2019 Medicare Shopping and Switching Study.

Back in 2019, MedSupp respondents were less likely to be on a prescription compared to MA respondents. Condition-wise, a higher proportion of MedSupp respondents had no conditions, and were less likely to have three to five. However, MedSupp consumers were more likely to indicate poor health—with 16% of MedSupp respondents noting poor or fair health compared to only 10% of MA.
There are plenty of stories of seniors waiting to enroll in their MedSupp as they transition from commercial coverage to Medicare before having their knee or hip replaced to avoid high-cost shares. But overall, MedSupp seniors are relatively healthy—and have been for a while. Despite taking a hit on any spikes in utilization initially, MedSupp plan managers today have slightly healthier memberships than those in traditional MA plans.
Why might this be the case?

Income is a critical social determinant of health. And with expensive MedSupp premiums, plus the need to purchase stand-alone drug, dental, hearing, and vision coverage, MedSupp is increasingly inaccessible to those with a tight monthly budget. Even if that might mean higher costs overall when a medical event occurs, a zero-dollar premium might be easier to stomach initially. As MedSupp carriers have raised premiums over the past few years, they may have also been able to lower their average member’s utilization risk.

But risk adjustment incentives may have played the largest role. Prior to 2023, seniors with multiple conditions were a profitable and important part of a carrier’s strategy. Despite multiple prescriptions, conditions, or overall poor health, risk adjustments meant that the added utilization risk to the insurer would be paid in part by Medicare and that these seniors could still be provided affordable coverage. In part, outreach and marketing to these consumers also shielded MedSupp carriers from the risk of high-utilization seniors entering MedSupp without underwriting.

But absorbing all that risk becomes a problem when the compensation for doing so decreases. Risk-adjustment reimbursement has been lacking as of late, with revisions to the risk model and normalization reducing payments to carriers by 2%. That comes at a time when most major MA carriers are already facing high MLRs that are weighing on profitability.
The solution for MA carriers to keep profit flowing likely involves a reduced appetite for high-utilization risk members—or an outright need to begin shedding some while increasing cost shares. Some of these seniors might move to other MA solutions, like C-SNP, that may be better equipped to support high utilizers. But MedSupp coverage is also effective coverage, especially for high utilizers who can avoid underwriting.

MA is in for a major shock this year. With potentially two million seniors receiving a letter notifying them their plan has been discontinued, there is already a large base of seniors who will be forced to switch—with a higher concentration of these seniors in PPOs. Millions more will decide to switch voluntarily as they look for better benefits.

MedSupp managers are no doubt excited about MA plan cutbacks providing an opportunity for conversion. But MedSupp managers should remain cautious: If MLRs or lackluster risk adjustment reimbursement are the reason MA plans are shedding members, they may have less interest in attracting high utilizers in their initial enrollment window. That may mean more high utilizers joining MedSupp without underwriting—and more risk for MedSupp managers to offset.

[1] CMS 2024 rate announcement: https://www.cms.gov/newsroom/fact-sheets/fact-sheet-2024-medicare-advantage-and-part-d-rate-announcement

[2] Source: Deft MA+PDP Exit Tracker, part of the Deft MAPD+PDP Disruption Tool.