By Arielle Elliott
The growth of Medicare Advantage in the last decade has reached a new milestone. More than half of all Medicare eligibles are enrolled in Medicare Advantage. To put the speed of this growth in perspective, in 2017, approximately 19 million individuals were enrolled in MA plans (33% share of the overall market). By 2022, this number had increased to over 28 million members (44%). The increased MA enrollment has largely continued through recent years, if slowing a bit within the last three. In June 2024, 33 million seniors have MA coverage.
Among the many reasons suggested for this movement toward MA, one of the most widely known factors is the efforts of MA plans toward generous supplemental benefit offerings. Through the Bipartisan Budget Act of 2018, CMS enabled MA plans to offer non-health benefits for chronically ill enrollees. Shortly after in 2019, CMS broadened its interpretation of “primarily health-related” benefits to include more services. This led to a whole host of non-medical supplemental options such as pest control, meal provisions, transportation benefits, or in-home support services.
However, this strategy may soon have to undergo significant changes due in part to several new CMS rulings. In April 2024, CMS published a series of upcoming changes for 2024 and 2025. These changes span many areas, including Star Rating calculation, risk adjustment data validation, utilization management, dual eligible special needs plans (D-SNPs), and Part D regulation. In addition, the Inflation Reduction Act has decreased the out-of-pocket maximum expenditure, which will result in lost revenue for carriers. Finally, Congress has cut next year’s base payments to Medicare Advantage plans by an average of 0.16%.
These policy changes have the potential to disrupt the financial viability of MA plans, in part by making it more challenging for them to afford extensive supplemental benefits. To forecast what kinds of benefits will be most reduced or impacted, we can look at what was reduced before these changes were made. Newer or less-traditional medical benefits have already seen reductions. Nearly 10% of MA plans that offered fitness trackers or medical transportation have dropped those benefits in 2024.
Alternatively, the impact of the new policy changes on MA supplemental benefit offerings could still be less severe than expected. In the first week of June 2024, the court ruled in favor of insurer SCAN Health Plan’s lawsuit to CMS against the new Star Rating calculation rule. This means that the projected losses many insurers would have faced due to the new CMS regulations may be tempered, as now plans can either receive their Star Rating based on the original calculation system, or using 2023 benchmarks for plan year 2024 ratings. With more money back in the hands of many of the largest insurers, the effects of these changes may not have the expected dramatic impact, at least not in the year 2025.
Source References:
https://www.cms.gov/newsroom/fact-sheets/2025-medicare-advantage-and-part-d-rate-announcement
https://jamanetwork.com/journals/jama-health-forum/fullarticle/2808747