According to the US Census Bureau, the number of Americans over age 65 is projected to double over the next four decades, growing from nearly 48 million seniors today to about 98 million by 2060.1
By 2030, the entire baby boomer generation will be older than age 65, meaning one in five U.S. residents will be over 65. In 2035, just five years later, roughly 78 million Americans will be over age 65.2
Not only is the aging population growing but older adults are also living longer, and many are living with serious chronic conditions. 67% of Medicare beneficiaries have two or more chronic conditions. Nearly all health costs are driven by patients with chronic conditions, for whom the federal government is the dominant payer. Individuals with multiple chronic conditions account for 94% of Medicare spending.3
As health care costs continue to increase and consumer costs rise, there is an urgency to improve quality and manage costs. The future of Medicare is the move away from traditional fee-for-service (FFS) models, which reimburse care based on the volume of services provided. Medicare Advantage instead rewards the value of health outcomes delivered, which is essential to achieve better outcomes and better costs. Medicare Advantage, the modern, private-public option, is the future of Medicare.3
Medicare Advantage is leading the innovative use of value-based care offering beneficiaries the choice of an integrated care plan, with a focus on patient-centered primary care, early intervention, and care coordination. It means greater simplicity, affordability, and enhanced benefits to improve health and well-being for the millions of individuals.
Today, one in three Medicare beneficiaries are enrolled in Medicare Advantage, benefiting from a higher quality of care at lower consumer costs.4
As of March 2019, 60.7 million beneficiaries were enrolled in Medicare, of which 22 million were enrolled in Medicare Advantage, accounting for 36% of total Medicare enrollment as of May 2019.56 Medicare Advantage enrollment will surpass 22 million by the end of 2019, marking an 11.5% increase from 2018.7 Over the past decade, Medicare Advantage enrollment has grown by nearly 50%.8 Medicare Advantage enrollment growth has been spurred by strong enrollment growth in employer-sponsored retiree plans, called “EGWPs”, as well as Special Needs Plans (SNPs).
In 2019, 44% of prescription drug coverage Part D enrollees are in integrated Medicare Advantage-Prescription Drug (MA-PD) plans up 14% from 2007, making up a growing share of the total Part D population.9 In 2019, for the first time since the beginning of the Part D program, enrollment in standalone Part D prescription drug plans (PDPs) declined slightly while enrollment in MA-PD plans continued to grow.10
When compared to Traditional FFS Medicare, Medicare Advantage is the preferred option for low-income beneficiaries and racial and ethnic minorities. Medicare Advantage enrollees also have higher rates of clinical social risk factors than those in FFS Medicare:
- Most recent data shows nearly half of Medicare Advantage beneficiaries (46%) have annual incomes of less than $24,000, compared to 37% in Traditional FFS Medicare. Medicare Advantage enrollees are more likely (21%) to be dual-eligible for Medicaid than Traditional FFS Medicare beneficiaries (17%).
- About 28% of Medicare Advantage beneficiaries are minorities, compared to 21% in Traditional FFS Medicare. 57% of Hispanic/Latino Medicare beneficiaries choose Medicare Advantage and 14% of beneficiaries in Medicare Advantage are Hispanic/Latino, while only 6% of Traditional FFS Medicare beneficiaries are Hispanic/Latino.11
- Medicare Advantage beneficiaries are 64% more likely to enroll in Medicare due to disability, have a 57% higher rate of serious mental illness, and have 16% higher rate of alcohol, drug, or substance abuse.12
Access & Affordability
In 2019, Medicare beneficiaries have access to nearly 3,700 plans offered across the country, an increase from 3,100 in 2018.13 Medicare Advantage’s framework allows flexibility to cover more services and benefits than Traditional FFS Medicare. Medicare Advantage beneficiaries choose plans based on cost of premiums and cost-sharing, covered services, provider networks, and the plan’s quality rating.
- In 2019, 99% of Medicare beneficiaries have access to at least one Medicare Advantage plan, but on average there are 34 plan choices per county. 100% of Medicare beneficiaries have access to a stand-alone prescription drug plans and 93% reside in counties served by at least one type of SNP.14 15
- In 2019, 94% of Medicare Advantage enrollees have access to at least one $0 premium plan, 90% have access to at least one $0 premium plan with drug coverage, and 46% of enrollees are in a $0 premium plan.16
In 2019, 46% of beneficiaries were in Medicare
Advantage health plans with $0 premiums.
- Over the past four years, the average monthly premium in Medicare Advantage has decreased, from $32.91 in 2015.17 CMS estimated that the Medicare Advantage average monthly premiums would decrease by $1.81 to $28.00 in 2019.
- When comparing average annual out-of-pocket costs, Traditional FFS Medicare beneficiaries pay about $550 more than Medicare Advantage beneficiaries, and they also pay about 35% more on prescription drugs.18
In addition, the number of Medicare Advantage plans offering vision, dental, and hearing benefits, not available in Traditional FFS Medicare, has increased.19 According to CMS, over 97% of Medicare Advantage plans offer at least a vision, hearing, or dental benefit and half of Medicare Advantage plans offer all three benefits. Vision benefits are the most commonly offered additional benefit, with about 94% of plans including or offering a vision benefit.20
- Medicare Advantage plans are now allowed to offer new benefit flexibilities to better integrate medical and non-medical care, particularly for chronically ill beneficiaries.21 22 23 In 2019, for the first time, 270 Medicare Advantage plans are offering about 1.5 million enrollees these new types of supplemental benefits at no additional cost.
Because Medicare Advantage is able to provide care coordination and engage in value-based arrangements with providers, it has proven to better control costs when compared to Traditional FFS Medicare. In fact, one study showed that health care spending is 25% lower for Medicare Advantage enrollees than for enrollees in Traditional FFS Medicare in the same county with the same risk score.25 In 2019, 76% of Medicare Advantage plans submitted bids (the amount they expect to spend per enrolled beneficiary) that were below Traditional FFS Medicare benchmarks (the amount Traditional FFS Medicare expects to spend per beneficiary). 83% of Medicare Advantage beneficiaries are enrolled in plans that bid lower than FFS benchmarks. A portion of the funds between the bid and the benchmark are available to eligible plans to be used for benefits that directly effect the beneficiaries, like supplemental benefits and reduced cost sharing. Medicare now spends roughly the same per beneficiary, on average, for Medicare Advantage as it does for Traditional FFS Medicare, achieving payment parity.26
Through value-based care, Medicare Advantage changes the incentives for providers so that they are rewarded for improving quality outcomes. Research has also demonstrated that when Medicare Advantage is prevalent in a health care market, it can positively influence how providers deliver care to all patients, not just Medicare Advantage beneficiaries. These studies have demonstrated that Medicare Advantage has both decreased costs and improved quality outcomes for beneficiaries in Traditional FFS Medicare, a phenomenon known as positive spillover.27
- One study found that Medicare Advantage enrollees were significantly less likely (10%) than Traditional FFS Medicare beneficiaries to have avoidable hospitalizations, which resulted in decreased hospitalizations for Traditional FFS Medicare as well.28
- Another study showed the risk-adjusted 30-day readmission rate among Medicare Advantage enrollees was 13% to 20% lower than the rate in Traditional FFS Medicare.29
- Researchers found that a 10% increase in Medicare Advantage penetration was associated with improved performance in Traditional FFS Medicare, including a 2.4% to 4.7% reduction in hospital costs.30
- Another study found that when more beneficiaries enrolled in Medicare Advantage plans, hospital costs declined for all Medicare beneficiaries and other commercially insured populations.31
- An article found the average length of stay for Medicare patients younger than 65, eligible for Medicare based on disability or end-stage renal disease, was 12.4% shorter for beneficiaries in Medicare Advantage as compared with those in Traditional FFS Medicare.32
In general, Medicare Advantage beneficiaries experience more efficient use of health care resources and lower rates of hospitalization, comparable to or better than those in Traditional FFS Medicare:
- Complex chronically ill beneficiaries in Medicare Advantage experience 23% fewer inpatient hospital stays and 33% fewer emergency room visits than in Traditional FFS Medicare;
- Medicare Advantage enrollees have 23% fewer inpatient hospital stays than Traditional FFS Medicare beneficiaries;
- Medicare Advantage enrollees are 29% less likely to have potentially avoidable hospitalizations when compared to Traditional FFS Medicare beneficiaries; and
- Medicare Advantage enrollees had 41% fewer avoidable acute hospitalizations than Traditional FFS Medicare beneficiaries.33
Medicare Advantage is leading the innovative use of value-based care which results in positive spillover to the Medicare system, delivering cost savings for beneficiaries and the Medicare Trust Fund.
The Star Ratings System in Medicare Advantage plays a critical role in promoting quality, ensuring public accountability, and giving beneficiaries the tools to choose high-quality plans. Star Ratings evaluate Medicare Advantage plans on 1-5 scale, with a Five-Star rating being the highest quality and performance is based on 48 health plan and prescription drug-specific measures including consumer experience.34 35 A recent study found Medicare Advantage operating within three diverse states provided substantially higher quality of care than Traditional FFS Medicare in all 16 clinical quality measures examined.36
Most Medicare Advantage beneficiaries are in high-quality plans. Star Ratings allow beneficiaries to make choices based on plan performance which is displayed online on Medicare Plan Finder to assist beneficiaries and their caregivers in comparing plan options. In 2019, approximately 74% of beneficiaries are projected to be in Medicare Advantage health plans with prescription drug coverage rated four stars or higher. Medicare Advantage Star Ratings moved the percent of individuals in high-quality plans from 24% to 74% in just nine years.37
Medicare Advantage plans with at least a Four-Star rating receive quality bonus payments on the rebates which are required by law to directly benefit beneficiaries. Rebates and bonus payments enable Medicare Advantage plans to invest in innovations, including home-based care, risk stratification to identify high need patients, care management, wellness programs, telemedicine, and additional benefits.
High-value care is accomplished through innovations in care delivery and dynamic payment arrangements. Value-based arrangements in Medicare Advantage focus on care teams and the identification of high risk, high need patients. Most Medicare Advantage plans and providers have value-based arrangements in place. In a recent study, 54% of family physicians indicate their practices participate in value-based payment models and that these models are making an impact on care delivery.38
According to a 2017 national survey of health plans, including Medicare Advantage plans, value-based payment arrangements were bending the cost curve and reducing unnecessary medical costs by 5.6% on average.39
Value-based contracting promotes smarter health care utilization patterns and improves clinical outcomes among beneficiaries with chronic conditions.40 Providers surveyed in a Deloitte report stated that high disease burden in Medicare Advantage can present greater opportunities for savings and quality improvements.41 Another recent study found value-based contracting in Medicare Advantage generated cost savings and a 32% lower risk of death.42 43
Research consistently demonstrates that Medicare Advantage beneficiaries have better health outcomes and higher rates of return to the community than those enrolled in Traditional FFS Medicare. For example, one study showed emergency room visits were 25% lower for Medicare Advantage beneficiaries, and another study showed Medicare Advantage helps beneficiaries have more healthy days in the community.44 45
There is also evidence that rates of annual preventive care were 25% higher in Medicare Advantage than in Traditional FFS Medicare for some of the most vulnerable seniors. Medicare Advantage also performs better in preventive screenings and test rates, including low-density lipoprotein testing 5% higher and breast cancer screenings 13% higher.46 47
Building the Evidence: Key Research
Studies show that Medicare Advantage plans drive down medical costs in the health care system. A three-year Medicare Advantage cancer management program provided $3 million in savings, while maintaining high quality.48
Medicare Advantage beneficiaries with diabetes enrolled in a diabetes-focused Chronic Condition Special Needs Plans (C-SNPs) are more likely to receive primary care services, less likely to have a hospital admission, and more likely to adhere to their antidiabetic medications and receive diabetes-specific testing than beneficiaries enrolled in non-SNP plans.49
One study comparing enrollees in a Medicaid-only program and those in a fully integrated Medicare-Medicaid program found enrollees in the integrated program were 48% less likely to have a hospital stay.50
University of Michigan researchers also found that Medicare Advantage plans were largely able to eliminate racial disparities for risk-factor control for hypertension, cardiovascular disease, and diabetes in Western states from 2006 through 2011.51
RAND researchers found that Medicare Advantage plans have positive trends in closing racial/ethnic disparities in quality of health care HEDIS measures between 2008 and 2012.52 Women in racial and ethnic minority groups have higher mammography rates in Medicare Advantage than in Traditional FFS Medicare.53
Racial/Ethnic disparities in primary care quality may be lower in Medicare Advantage than in Traditional FFS Medicare.54
Data shows a 19% reduction in hospital inpatient days and a 28% reduction in hospital admissions for chronically ill C-SNP diabetic patients in Medicare Advantage as compared to Traditional FFS Medicare diabetic patients.55
Growth & Support
Medicare Advantage is successful because policymakers, health plans, providers and beneficiaries recognize the value achieved by a fully integrated care delivery system. Medicare Advantage beneficiaries report very high levels of satisfaction: 92% are satisfied with the quality of care received, 89% are satisfied with the selection of available doctors, and 81% said they believe they experience better health outcomes with Medicare Advantage.56
Providers are also increasingly realizing the value of the capitated, integrated model offered under Medicare Advantage. In 2016, providers represented 58% of new Medicare Advantage organizations entering the program.57 According to the American Medical Group Association, Medicare Advantage plans accounted for 30% of revenues and fully capitated Medicare Advantage payments were 24% of revenues in 2018, an increase from 10% in 2016.58
Medicare Advantage has shown strong bipartisan support among Members of Congress. In 2019, 368 Members of Congress signed letters in support of Medicare Advantage, including 66 newly-elected freshman Members of the House of Representatives.
CMS: “Medicare Advantage remains a popular choice among beneficiaries and has high satisfaction ratings.”59
“I think [Medicare Advantage] is a great option for our seniors.”
HHS Secretary Azar 60
“The success of Medicare Advantage and the prescription drug program demonstrates what a strong and transparent health market can do—increase quality while lowering costs.”
CMS Administrator Seema Verma 61
CMS: “Medicare Advantage has been successful in providing Medicare beneficiaries with options so that they can choose the healthcare that best fits their individual health needs. The Medicare Advantage program demonstrates the value of private sector innovation and creativity…”62
MedPAC: “The Commission strongly supports the inclusion of private plans in the Medicare program; beneficiaries should be able to choose between the traditional FFS Medicare program and alternative delivery systems that private plans can provide. Because Medicare pays private plans a per person predetermined rate rather than a per service rate, plans have greater incentives than FFS providers to innovate and use care-management techniques.”63
“Medicare Advantage is an important component of choice for Medicare-eligible Americans…The intrinsic value of MA is that people enrolled in the program receive coordinated care, thus improving their chances of staying healthy or recovering from their illnesses.”
Former Secretary of HHS (2009–2014) Kathleen Sebelius 64
11. Analysis of 2016 Medicare Current Beneficiary Survey (MCBS) Data, Provided by Anne Tumlinson Innovations.
12. Medicare Advantage Achieves Cost-Effective Care and Better Outcomes for Beneficiaries with Chronic Conditions Relative to Fee-for-Service Medicare. Avalere Health, July 2018.
18. Analysis of 2016 Medicare Current Beneficiary Survey (MCBS) Data, Provided by Anne Tumlinson Innovations.
19. Avalere Analysis of 2018 Medicare Advantage Enrollment, 3/18.