Is Medicare Advantage A Good Deal for Enrollees?

Source: KFF

Medicare Advantage has grown in popularity for many reasons: low or zero premiums, the appeal of the one-stop shop for benefits compared with juggling Part D and Medigap choices, the supplemental benefits, such as dental and vision coverage. According to KFF, 54% of Medicare beneficiaries were enrolled in Medicare Advantage this year and the Congressional Budget Office projects that proportion will increase to 64% in 2034.

But in opinion article published today in JAMA, David Blumenthal, M.D., M.P.P., and Gretchen Jacobson cast some doubt on whether Medicare Advantage coverage makes healthcare more affordable than traditional Medicare for Medicare beneficiaries. Multiple surveys show that beneficiaries find care no more affordable in an MA plan than in traditional Medicare, they say, and they call for further research into the issue.

Blumenthal, a professor at the Harvard T.H. Chan School of Public Health, is former president of the Commonwealth Fund. Jacobson is at vice president at Commonwealth Fund who specializes in Medicare issues.

Blumenthal and Jacobson cite results of Commonwealth Fund surveys to make their case that Medicare Advantage holds no apparent advantage to traditional Medicare when it comes to affordability. For example, they cite Commonwealth Fund survey results published last year that showed that a larger proportion of MA enrollees had problems accessing care due to costs compared with traditional Medicare enrollees (41% vs.35%) and that stratifying by income didn't make a difference. Blumenthal and Jacobson shared other Commonwealth Fund survey results that paint a similar picture of affordability being problematic in Medicare Advantage plans.

Medigap coverage can, of course, make a big difference in how people with traditional Medicare experience healthcare costs and out-of-pocket expense. Citing a Medicare Payment Advisory Commission (MedPAC) report that came out earlier this year, Blumenthal and Jacobson said that a minority — 41% — of those with traditional Medicare coverage have Medigap plans, and they acknowledge that for those who cannot afford the Medigap premium or cannot get a policy because of underwriting and preexisting condition restriction "may find healthcare more affordable under MA [Medicare Advantage] plans.” They also note that pluses of Medicare Advantage must be factored in with the shortcomings, which “health and quality of life benefits” of the supplemental dental and other benefits for those that use them.

Blumenthal and Jacobson offer some possible explanation for people in Medicare Advantage plans having problems with healthcare costs. Provider networks may seek out-of-network care that has high out-of-pocket costs. Delays in care because of prior authorization and other techniques for managing care may result in some enrollees paying for care out of pocket. Although Medicare Advantage plans have limits on out-of-pocket costs — in 2024, the out-of-pocket limit is $8,850 for in-network services and $13,300 for in-network and out-of-network services combined — many people may not reach those limits. Blumenthal and Jacobson also say that “unmeasured patient characteristics,” perhaps related to income, could also explain the lack of a major differences in the perception of affordability among Medicare Advantage enrollees and those who stayed with traditional Medicare.

They note, though, that the Medicare Advantage enrollees cost the federal government about $2,500 more on an annual basis in 2024 than people in traditional Medicare, an assertion also based on the MedPAC report published in March 2024. With that higher cost and the requirement that the plans are supposed to use the extra money to reduce enrollees’ expenses, “one might expect the perceived affordability of care” to be greater among those enrolled in Medicare Advantage plans than those in traditional Medicare, they note.