Medicare Advantage Plans in 2017: Short-term Outlook is Stable
With nearly one-third of all Medicare beneficiaries enrolled in Medicare Advantage plans in 2016,1 there is ongoing interest in the evolution of this marketplace and how well it is working for people on Medicare. For the past several years, the Medicare Advantage market has appeared to be relatively stable, based on the metrics available, with few changes in average premiums, plan offerings, and insurer participation. Less information is available about cost-sharing for Medicare-covered services, extra benefits, or Medicare Advantage provider networks, including how they may have changed over time.2
This spotlight analyzes publicly available data to review the Medicare Advantage plans offered in 2017, with information on including plan availability, premiums, out-of-pocket limits and other plan features:
- The average Medicare beneficiary will be able to choose from 19 plans in 2017, a number which has been relatively stable since 2012.
- The average beneficiary will be able to choose from plans offered by six firms; one-quarter of beneficiaries nationwide will have a choice of plans offered by three or fewer firms in 2017.
- If enrollees in Medicare Advantage prescription drug plans (MA-PDs) stay in the same plan between 2016 and 2017, their premiums will increase by 4 percent, on average.
- While premiums have been relatively flat, average limits on out-of-pocket costs for Part A and B benefits have increased by 25 percent, since 2011 from $4,281 in 2011 to $5,332 in 2017.
- About four in ten (41%) plans are rated as 4 stars or higher in 2017. Since 2012, Medicare has paid bonus payments to Medicare Advantage plans with four or more stars.
The design of Medicare Advantage plans is heavily influenced by the level of federal payments to plans and the requirements of plans. As of 2017, the payment reductions adopted in the Affordable Care Act (ACA) will be fully phased-in. The effects of these reductions have been partly blunted by quality-based bonus payments to plans and the way payment reductions were applied.3 In 2016, federal payments to plans are estimated to be 2 percent higher than traditional Medicare spending, on average, including the bonus payments.4
The Medicare Advantage market is highly consolidated nationwide and could become more so depending on the outcomes of the proposed Aetna-Humana and Anthem-Cigna mergers. Such market concentration can influence the competiveness and the stability of the market. More longer-term, some lawmakers are proposing to transform Medicare into a premium support system, building off of Medicare Advantage. A premium support system would likely look very different from current Medicare Advantage plans since it would change federal payments to plans and plans’ financial incentives, with uncertain effects for plans and beneficiaries.