The Growth in Share of Medicare Advantage Spending

Earlier this week, the Biden Administration announced the final Medicare Advantage rates for 2023, which are projected to result in an average increase in Medicare Advantage plan revenue of 8.5% compared to 2022 – the highest average expected increase in recent years.

Payments to Medicare Advantage plans as a share of total Medicare spending on Part A and Part B services have increased from 26% in 2010 to 45% in 2020, and are expected to rise to 54% in 2030, accounting for more than half of Medicare Part A and B spending by 2024.

The increase in federal spending on Medicare Advantage corresponds to rapid growth in Medicare Advantage enrollment, as well as higher and faster growing payments per Medicare Advantage enrollee compared to spending in traditional Medicare.

The higher spending also contributes to Medicare’s solvency and affordability challenges, including the projected depletion of the Hospital Insurance Trust Fund in 2026, and rising Part B premiums for all Medicare beneficiaries, including those in traditional Medicare.

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