The Advantages of Medicare Advantage

Enrolling in a Medicare Advantage (MA) plan can ring up big health care savings for seniors, results of a recent study by UnitedHealth Group show. Using industrywide data from Milliman, the actuarial and consulting firm, the health services company found that those enrolled in an MA plan save, on average, 40% in annual premiums and out-of-pocket costs, or roughly $2,000 a year, compared with beneficiaries in
the traditional Medicare.

The findings indicate, for example, that a 73-year-old individual in average health in 2020 would have spent $3,558 annually for MA coverage compared with $5,361 for traditional Medicare along with a Medicare Part D prescription drug plan. If the person also had purchased Medigap coverage, the cost would have risen to $5,992. It’s not surprising that a UnitedHealth Group study would champion MA coverage. The company is the largest MA plan provider, by enrollment, with a 26% market share, according to the Kaiser Family Foundation (KFF).

The popularity of MA has surged in the past decade as baby boomers swell the ranks of those covered by Medicare. Enrollment more than doubled from 2010 to 2020, according to a tally kept by KFF: 11 million seniors were enrolled in MA plans in 2010 compared with 24 million a decade later. Those 24 million account for almost 40% of Medicare beneficiaries.

David Muhlestein, chief strategy and chief research officer at Leavitt Partners, a health care consulting firm, cautions against an overly rosy picture of MA. Because of the differences between MA and traditional Medicare, calculating cost savings “isn’t apples to apples in terms of benefits for most beneficiaries,” he says. Additionally, many MA plans have narrow networks, so beneficiaries run the risk of having to go out of network to get required care, he notes. Muhlestein also points out that the government pays MA plans about 2% more per enrollee than it does for those enrolled traditional Medicare.

The UnitedHealth Group study also includes state-by-state comparison. In states such as Florida, where competition is fierce and half the Medicare beneficiaries are enrolled in MA plans, savings average 57% when compared to Medicare fee for service, according to UnitedHealth’s numbers. On the other end of the spectrum, only 4% of Medicare beneficiaries are enrolled in MA plans in Wyoming, and the savings average just 19%.

The companies selling MA coverage argue that the benefits go beyond dollar savings. Those with MA coverage receive “coordinated care, ensuring Medicare Advantage members have the access they need, while keeping overall health care spending down,” says Lambert van der Walde, executive director of UnitedHealth’s Center for Health Reform & Modernization.

The Better Medicare Alliance, a research and advocacy group for MA funded by insurers, released a study in March that had similar findings to the one conducted by UnitedHealth. The alliance’s study used 2018 Medicare Current Beneficiary Survey data to show that MA enrollees saved 40% in premium and out-of-pocket costs compared with people in traditional Medicare ($3,354 versus $4,994).

Susan Ladika is an independent journalist in Tampa, Florida, who covers healthcare and business.