As of 2023, most people eligible for Medicare are enrolled in Medicare Advantage plans administered by commercial insurers, rather than traditional Medicare plans sponsored by the federal government. The Kaiser Family Foundation reports that 31 million people are now enrolled in a Medicare Advantage plan, with almost half of them (47%) served by United Healthcare or Humana.
This is 51% of all people eligible for Medicare, compared with 19% in 2007. The Congressional Budget Office projects that 62% of Medicare participants will be in Medicare Advantage plans by 2033.
Given the explosive growth in Medicare Advantage participation, many readers have likely seen patients served by Medicare Advantage or will soon. Below is information about the program’s purpose, strengths, limitations, and effect on physicians.
How does Medicare Advantage differ from traditional Medicare?
A Medicare Advantage plan is approved by the U.S. Centers for Medicare & Medicaid Services and competes for customers by offering lower premiums and/or more benefits. Traditional Medicare plans are unified contracts across the country, with the same fees for the same services paid nationwide.
CMS pays Medicare Advantage plans a per-member rate, which can be increased for people who seem sicker than other plan participants – for example, someone with uncontrolled diabetes and multiple comorbidities. This so-called “risk adjustment” doesn’t exist in traditional Medicare.
CMS also gives incentive payments to Medicare Advantage plans whose members receive better care, measured by such metrics as lower unnecessary hospital admissions. There are some analogues to this in traditional Medicare, such as the Making Care Primary program, but value-based care is a larger component of Medicare Advantage.
“Being paid for outcomes is what we as physicians always thought we went into medicine to do,” said Sarah Candler, MD, an internist in Houston. She most recently worked for One Medical and her experiences with Veterans Affairs and One Medical focused on value-based contracts, including for Medicare Advantage plans.
How do patients benefit from Medicare Advantage?
“Honestly the financial benefits to patients are what’s really driving the rise in Medicare Advantage,” said
Claire Ankuda, MD, MPH, is a geriatrician at the Icahn School of Medicine at Mt. Sinai in New York who has published extensively about Medicare Advantage.
A spokesperson for Highmark Health, which provides Medicare Advantage plans, told us that “Medicare Advantage plans are offered by private health insurers, such as Highmark, and typically offer benefits that support members’ total health, such as low-cost access to doctors and preventive care, and cover things like prescription drugs, vision, and hearing services, dental, and chiropractic care. Medicare Advantage plans also protect members from unforeseen costs like hospitalizations, surgery, or an expensive drug. And unlike traditional Medicare, Medicare Advantage plans can offer set copays for doctor’s visits (rather than coinsurance) to help members budget for their costs.”
Dr. Ankuda said hospitalization costs are sometimes higher for Medicare Advantage but agreed that costs for doctor visits are often lower with Medicare Advantage plans than with traditional Medicare.
So while the overarching goal of Medicare Advantage makes sense, Dr. Candler said, the actual physician experience of working with Medicare Advantage can be challenging.