Enrollment Update on the Medicare Advantage Market

Despite provisions in the Patient Protection and Affordable Care Act (ACA) of 2010 that froze Medicare Advantage (MA) payment rates to 2010 levels, enrollment in MA plans continued to rise in 2011. Likewise, with the use of private fee-for-service (FFS) plans limited under the new law, decreasing enrollment in private FFS plans has been compensated for with increases in preferred provider organization (PPO) plan enrollment. In a data spotlight titled Medicare Advantage Enrollment Market Update issued in September by the Kaiser Family Foundation’s Program on Medicare Policy, the foundation provides an overview of MA enrollment patterns in March 2011. In 2011, the average MA enrollee’s monthly premium was approximately $39, about $5 less than in 2010. Just over half (52%) of all MA enrollees with prescription drug coverage are in a plan that requires no premium beyond the Part B premium required of all Medicare beneficiaries. As reductions in payments to plans included in ACA are phased in, along with potentially offsetting new bonus payments based on quality ratings, it is uncertain whether the current patterns of decline in average premiums will continue. Currently, 25%, or nearly 12 million beneficiaries, of the Medicare population are enrolled in an MA plan. Since 2004, enrollment has more than doubled and, despite a 13% decline in the number of MA plans, has increased by 7% since 2010. In 2011, the majority (65%; n=7.7 million) of MA enrollees are in health maintenance organizations (HMOs). Enrollment in HMOs has been steadily increasing in absolute numbers, but not as a share of the total MA population. Enrollment in PPOs is increasing at a rate higher than any sector of the MA market; gains for local PPOs are particularly strong. In 2011, enrollment in local PPOs was 2.1 million, up 65% from 1.3 million in 2010. Enrollment levels in the 2 types of plans vary depending on population density: in urban counties, 69% of MA enrollees are in HMOs, whereas in rural areas, PPOs are more prevalent, with 46% of rural MA beneficiaries enrolled in a PPO. The majority of MA enrollees are in individual plans; the rest are Medicare-eligible retirees enrolled through group plans offered by a former employer. Group enrollment increased 12% in 2001, a reflection of employers moving their Medicare-eligible retirees into MA plans to control the costs of employer-sponsored health benefits. There are substantial variations in MA penetration from state to state: in 10 states (AK, DE, IL, MD, MS, ND, NH, SD, VT, and WY), <10% of all beneficiaries are in an MA plan in 2011, whereas in 13 other states (AZ, CA, CO, FL, HI, MN, NV, NY, OH, OR, PA, RI, and UT), ≥30% of enrollees are in an MA plan. Minnesota has the highest percentage of enrollees in an MA plan (43.5%) in 2011. Enrollment in MA plans increased in all but 6 states (IL, MA, MT, NE, WV, and WY) in 2011. In terms of percentage, the increase from 2010 was greatest in Michigan and Vermont, followed by South Dakota and North Dakota. In 2012, Medicare payments to plans will begin to phase down in compliance with provisions in the ACA. Payments will be based on the counties’ Medicare FFS costs and the quality-based bonus payments for which the plan may be eligible. The maximum Medicare will pay a plan, known as benchmarks, will be lower in all counties, but counties with relatively high FFS Medicare costs will have relatively lower benchmarks, and counties with relatively lower FFS costs will have relatively higher benchmarks. Benchmarks will range from 95% of Medicare FFS costs for counties in the top quartile of per capita FFS spending to 115% of FFS costs in the bottom quartile of per capita FFS spending. The spotlight also reported on the firms in the MA market, noting that a small number of firms continue to dominate the market: >1 in 3 MA enrollees is in a UnitedHealthcare (18%) or Humana (16%) plan, and Blue Cross Blue Shield affiliates account for 17% of enrollees. The next largest share is Kaiser Permanente (8%), followed by Aetna (3%). The remaining 37% are distributed over a combination of other national firms. The small number of firms accounting for a large share of the MA market holds true at the state level, as well. In 33 states and the District of Columbia, 3 companies account for ≥75% of enrollees, and in another 16 states, 3 companies account for between 50% and 74% of all enrollees. The authors concluded by noting that “despite concerns about the effects of the 2010 health reform payment reductions on Medicare Advantage plans, enrollment has continued to rise, average premiums have declined, and many large national firms are keeping a strong foothold in this marketplace.… As payment reductions are phased in, along with bonus payments to plans, it will be important to asses their effects on benefits and cost-sharing, premiums, and plan choices available to beneficiaries throughout the country.”