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.

Plan Offerings in 2017

Number of Plans Offered

In total, 2,034 Medicare Advantage plans will be available nationwide for individual enrollment in 2017, a number that has been relatively stable since 2011 (Figure 1).  Among the plans that were available in 2016, 238 will be exiting the Medicare Advantage market, and 271 plans will be offered for the first time (Table A1).  While virtually every state will see some change in the number of plans, most of the plans exiting the market in 2017 attracted relatively few enrollees in 2016. Just under 3 percent of all Medicare Advantage enrollees in 2016, 414,710 beneficiaries, will need to choose a new plan in 2017 because their plan exited.

HMOs continue to account for the large majority of plans available, and will account for two-thirds of all plans offered in 2017 (Table A1).  Since 2010, the number of HMOs has increased each year, with 36 more HMOs in 2017, while the availability of other plan types has either remained similar or decline.

Since 2012, the number of plans available to Medicare beneficiaries has been relatively stable.  The average beneficiary will be able to choose from among 19 plans, on average, in 2017, the same number as in 2016 (Figure 2).  Beneficiaries in metropolitan areas will be able to choose from 21 plans, on average, and beneficiaries in non-metropolitan areas will be able to choose from 11 plans, on average, the same as in 2016.  Similarly, the average number of plans available to beneficiaries in the lowest cost counties (i.e., lowest quartile of counties) and in other counties will remain the same in 2017 as it was in 2016, ranging from 15 plans available in the lowest cost counties to 23 plans available in the highest cost counties; Table A2).

Despite the high number of plans available per beneficiary, relatively fewer plans are available in many counties.  In almost one-third (30%) of counties, most of which are rural, beneficiaries can choose from five or fewer Medicare Advantage plans, including 10 percent of counties with less than 3 plans in 2017 (Figure 3).  At the other end of the spectrum, in about one-quarter of counties, beneficiaries can choose from 16 or more plans, including 4 percent of counties in which beneficiaries can choose from more than 30 plans in 2017.  About 14 percent of beneficiaries are in counties that have two plans or less and 54 percent of beneficiaries are in counties that have 5 or fewer plans.

Number of Firms Offering Medicare Advantage Plans

The average Medicare beneficiary will be able to choose from many plans, but in some areas, these plans will be offered by a handful of firms.  The average Medicare beneficiary will be able to choose from plans offered by 6 firms, on average, in 2017, with sizeable variation across counties (Figure 4).  One-quarter of beneficiaries will be able to choose from plans offered by three or fewer firms, while another quarter of beneficiaries will be able to choose from plans offered by 8 or more firms.  The number of firms offering Medicare Advantage plans will be highest in the New York City area (Bronx, Kings, Queens, and New York Counties), Los Angeles County, and Orange County, California, where 15 or more firms will be offering Medicare Advantage plans. In contrast, in 439 counties in 26 states, most of which are rural counties with few Medicare beneficiaries, only one firm will offer Medicare Advantage plans in 2017, and in another 154 counties, zero firms will offer Medicare Advantage plans.

Access to Medicare Advantage Plans

As in recent years, virtually all Medicare beneficiaries (99%) will continue to have access to a Medicare Advantage plan as an alternative to traditional Medicare (Figure 5).  Virtually all beneficiaries in metropolitan areas (99%) and the vast majority of beneficiaries in non-metropolitan areas (97%) will continue to have access to at least one Medicare Advantage plan, similar percentages as in 2016.  Consistent with prior years, in non-metropolitan counties relative to metropolitan counties, a smaller share of beneficiaries will have access to HMOs or local PPOs, and a slightly larger share of beneficiaries will have access to private fee-for-service (PFFS) plans and regional PPOs.

Change in Plan Availability By Firm

Half of the 271 new Medicare Advantage plans in 2017 are offered by UnitedHealthcare, Aetna, and firms affiliated with BlueCross BlueShield (BCBS; Figure 6).  UnitedHealthcare alone accounts for about one-quarter of all new Medicare Advantage plans.  Aetna and Humana, whose proposed merger is pending, together account for another one-quarter of new plans.

Fewer plans will be exiting than entering the Medicare Advantage market in 2017, and some firms will also be offering Medicare Advantage plans for the first time. Most of these appear to be local companies, some like SharpAdvantage in San Diego.  These new firms will be in nine states: California, Illinois, Iowa, Georgia, Florida, Mississippi, North Dakota, Pennsylvania, and South Carolina.

Most (60%) of the 171 departing plans were offered by smaller firms that tend to have a more regional focus.  Humana, Aetna, and BCBS affiliates comprise about one-quarter (26%) of the departing plans, with other national insurers, such as UnitedHealthcare, Cigna, Kaiser Permanente, Anthem and Wellcare, comprising a total of 15 percent, each with less than 3 percent of the departing plans.

Plan Premiums

Medicare beneficiaries enrolled in Medicare Advantage plans pay the Part B premium like other beneficiaries (less any rebate provided by the Medicare Advantage plan), and may also pay an additional monthly premium charged by the Medicare Advantage plan for benefits and prescription drug coverage. This analysis of premiums includes only Medicare Advantage plans that offer prescription drug coverage (MA-PDs).  The minority of Medicare Advantage plans (12%) that do not cover prescription drugs are not included in the analysis, in order to better compare premiums across plan types and years. The analysis also weights plans by their 2016 enrollment to reflect the impact of premium changes on current enrollees.  (Unweighted premiums, which reflect beneficiaries’ plan options, are in Appendix Table A3)

Premiums (Weighted by Enrollment), Assuming Enrollees Remain in the Same Plan

To examine how premiums will change for Medicare Advantage enrollees, assuming they remain in the same plan between 2016 and 2017, this spotlight examines the premiums among MA-PDs offered in both years and weights the premiums by plan enrollment in 2016. This analysis includes plans with no premiums as well as plans with monthly premiums.  Enrollees may be able to prevent or reduce increases in premiums by switching to another plan.  After the open enrollment period, we will analyze the premiums for plans selected by all Medicare Advantage enrollees in 2017.⁵  In recent years, average premiums, weighted by actual enrollment, have tended to be lower than estimates of weighted premiums based on prior year enrollment.

The difference reflects the net impact of beneficiaries making enrollment changes between one year and the next, and plan choices among new Medicare Advantage enrollees.  Based on plan enrollment in the Fall of 2016, the average Medicare Advantage enrollee in a plan that will continue to be offered in 2017 will pay about $39 per month, an increase of $2 per month (or 4%) compared to 2016, if they stay in the same plan (Figure 7). In percentage terms, enrollees in PFFS plans will experience a larger increase in premiums (8% on average) than enrollees in other types of Medicare Advantage plans, assuming no change in enrollment.  Monthly premiums, weighted for 2016 enrollment will be lower for enrollees in HMOs ($29 per month) than for enrollees in other types of Medicare Advantage plans.

In general, enrollees in MA-PDs that will continue to be offered in 2017 had somewhat lower premiums (averaging $37 per month), on average, than enrollees in plans that will be exiting the market (averaging $42 per month; Table A1).  However, the difference varies across plan types and these changes are difficult to interpret because plan premiums are a function of many plan-specific factors, as well region-specific factors.

Change in Premiums.   While over half (56%) of Medicare Advantage enrollees will see no change in their premiums, some enrollees will experience increases or decreases in their monthly premium (Figure 8).  About 8 percent of enrollees will see the largest increases, with monthly premiums increasing by $11 or more a month, if they do not change their plan.  In contrast, one in seven MA-PD enrollees (15%) will see premiums decline in 2017, if they stay in the same plan.

The change in monthly premiums also will vary somewhat across the country (Figure 9).  In most states, average premiums will increase or decrease by less than $5 per month.  However, in North Dakota, average premiums will decrease by about $8 per month, while in Massachusetts and Hawaii, average premiums will increase by more than $9 per month.  Other work has shown that only about 10 percent of Medicare Advantage enrollees switch plans each year, and the share of people switching plans does not significantly increase until premiums increase by $20 or more per month, at which point 20 percent of enrollees switch plans, on average.⁶ 

Access to Plans with No Premium

Medicare Advantage plans with no additional premium (other than the Medicare Part B premium) – so called “zero premium plans” – have been a feature of the Medicare Advantage landscape for many years. About four-fifths (81%) of all beneficiaries will have access to a zero-premium MA-PD in 2017, the same as in 2016 (Figure 10).  The continued availability of zero-premium plans mainly reflects offerings among HMOs since zero-premium plans are less common among other plan types. More local PPOs will have zero premiums in 2017 but the share of local PPOs using this feature has varied over time.

Limits On Out-of-Pocket Spending

The traditional Medicare program does not include a limit on out-of-pocket spending for services covered under Parts A and B.  In contrast, Medicare Advantage plans are required to limit enrollees’ out-of-pocket expenses for services covered under Parts A and B to no more than $6,700, with higher limits allowed for services received from out-of-network providers.  Even before the 2011 implementation of this requirement, most Medicare Advantage plans (79% in 2010) voluntarily included a limit on enrollees’ out-of-pocket spending.⁷   CMS encourages plans to limit enrollees’ out-of-pocket expenses to no more than $3,400 per year, by allowing these plans to charge higher cost-sharing for some services.  These out-of-pocket limits do not include expenses for Part D prescription drugs (which have a separate catastrophic threshold), nor do they include expenses for extra benefits or for services not covered by the plan.

Continuing the trend since 2011, out-of-pocket limits for MA-PDs will be higher in 2017 than in prior years, on average. In 2017, the average plan’s limit will be $5,332, up from $4,281 in 2011 (Figure 11).

In 2017, two-fifths of plans (39%) will have limits equal to the maximum ($6,700), the same as in 2016. About 19 percent of plans will have a limit of $3,400 or less in 2017, a sharp decline since 2011 when over half (53%) of plans had limits of $3,400 or less. Average out-of-pocket limits are increasing across all plan types (Figure 12). Almost three-quarters (72%) of regional PPOs, half (51%) of local PPOs, and one-third (35%) of HMOs have out of pocket limits equal to $6,700.  Limits at or below $3,400 are rare across all plan types.

Prescription Drug Coverage

In 2017, the vast majority (88%) of Medicare Advantage plans will offer prescription drug coverage. Historically, plans without a drug benefit were developed for beneficiaries who may have access to other sources of prescription drug coverage, such as retiree health coverage from former employers or the Veterans Health Administration, as well as those who for any other reason do not want to purchase such coverage.

Coverage of the Part D Deductible

The standard design of the drug benefit includes an initial coverage deductible which is updated each year, and is $400 in 2017.  Plans can vary the benefit design as long as they provide cost-sharing that is at least actuarially equivalent to the standard benefit. In 2017, half (51%) of MA-PDs will impose a deductible for prescription drug coverage.  Since 2010, the average MA-PD deductible has quintupled from $26 in 2010 to $135 in 2017 (Figure 13).  A smaller share of MA-PDs will charge the maximum deductible (10% in 2017 versus 16% in 2016).  Deductibles are more frequently used  in free standing PDPs and more charge the maximum allowed amount.⁸ 

Quality Ratings

For many years, the CMS has posted quality ratings of Medicare Advantage plans to provide Medicare beneficiaries with additional information about plans offered in their area. All Medicare Advantage plans are rated on a 1 to 5-star scale, with 1 star representing poor performance, 3 stars representing average performance, and 5 stars representing excellent performance.  CMS assigns quality ratings at the contract level, rather than for each individual plan. This means that every Medicare Advantage plan covered under the same contract receives the same quality rating, and most contracts cover multiple plans of the same type (e.g. HMO).

Since 2012, Medicare Advantage plans have received bonus payments based on their contract’s quality ratings, and plans within contracts with higher ratings also receive higher rebate amounts.  In 2017, plans within contracts with 4 or more stars will receive bonuses of 5 percent. Plans in lower scoring contracts receive no bonuses. (Those too new or with too few enrollees in their contract to be rated get a bonus of 3.5 percent).  These bonus percentages are doubled in some counties.⁹   Additionally, beneficiaries can enroll in a plan with 5 stars (the highest rating)  at any time during the year, not just during the annual open enrollment period.

In 2017, about four in ten (41%) Medicare Advantage contracts will have ratings of four or more stars, similar to 2016 (Figure 14).  Five percent of contracts received 5 stars, the highest rating possible.  More than one-third (35%) of contracts will have average ratings (3 or 3.5 stars), and 2 percent of contracts will have below average ratings (2 or 2.5 stars) in 2017.

Change in Number and Availability of Plans Offered by Firm

While many organizations offer Medicare Advantage plans, most plans are owned or affiliated with a small number of companies and organizations.  In 2016, 7 firms and affiliates accounted for almost three-quarters of all enrollment: UnitedHealthcare, Humana, Blue Cross and Blue Shield (BCBS) affiliated companies (including Anthem BCBS plans), Kaiser Permanente, Aetna, Cigna, and Wellcare. These companies and affiliates account for 64 percent of the plans being offered in 2017 (Table A4).

Firm strategies are reflected both in the types of plans they offer and the share of beneficiaries to whom they are available (Figure 15; Table A5).  Two firms with the largest footprints in the Medicare Advantage market are United Healthcare and Humana.  In 2017, 74 percent of Medicare beneficiaries will have a United Health plan available to them for individual enrollment, and 83 percent will have a Humana plan.  Humana’s footprint continues to be large despite recent declines in the total number of plans they offer nationwide. Humana offers diverse types of plans than most other firms. HMOs, local PPOs, and regional PPOs offered by Humana will be available to more than half of beneficiaries (56%, 58%, and 61%, respectively) and Humana PFFS plans will be available to about four in ten beneficiaries (39%).  UnitedHealthcare offerings, in contrast emphasize HMOs. More than half of beneficiaries (61%) will have access to a UnitedHealthcare HMO in 2017, up from 55 percent of beneficiaries in 2016.

How Mergers Could Affect Medicare Advantage Plan Offerings

Aetna’s proposed merger with Humana has raised concerns about its potential to reduce competition in the Medicare market.  Humana is a dominant firm in the Medicare Advantage market and a merger with Aetna would likely increase the dominance of the combined firms, even with some divestment. Even without a merger, Aetna’s footprint in the Medicare Advantage market has expanded since its acquisition of Coventry.  In 2017, Aetna plans will be available to more than half (56%) of all beneficiaries, up from 49 percent in 2016 and 33 percent in 2014, the year after the acquisition of Coventry.  Between 2016 and 2017, Aetna will greatly increase the number of local PPOs it offers, rising from 82 plans in 2016 to 117 plans in 2017.  Accordingly, a larger share of beneficiaries will have access to an Aetna local PPO (52%) in 2017, up from four in ten (40%) beneficiaries in 2016, and one-third of beneficiaries (33%) in 2015.

Cigna and Anthem have also proposed to merge, although this would have less of an impact on the Medicare Advantage marketplace than the Aetna-Humana proposed merger.  Nonetheless, with its conversion to for profit status and acquisition of other BCBS affiliates, Anthem BCBS has expanded the geographic scope of its Medicare Advantage market, and will be available to 24 percent of all Medicare beneficiaries in 2017.  Cigna currently is a somewhat smaller player in the Medicare Advantage market, with its plans available to 20 percent of beneficiaries in 2017.  If this merger is approved, concerns about the effects on competition in Medicare Advantage would likely be limited to a few specific markets.

Discussion

Plan choices for beneficiaries will be relatively stable between 2016 and 2017, with very little change in the number or type of plans available to beneficiaries or the firms offering those plans.  Firms continue to offer diverse products and most beneficiaries have a choice of HMOs and PPOs, while fewer beneficiaries have access to PFFS plans.  Most beneficiaries will continue to have a wide choice of plans, including plans that require no additional premiums. Premium increases generally will be moderate but will vary considerably across enrollees.  Medicare beneficiaries enrolling in a Medicare Advantage plan will find that the plans available to them, on average, have somewhat higher quality ratings in 2017 than in 2016 but provide less financial protection with higher limits on out-of-pocket costs.

Given the rise in Medicare Advantage enrollment, it is unfortunate that beneficiaries do not have more information that is readily available to facilitate plan comparisons and inform their choices.  In particular, it remains challenging for consumers (and researchers) to obtain information that can be used to compare plan networks, cost sharing, and extra benefits, or the performance of individual plans on quality and efficiency metrics.  Such information could be used to strengthen program oversight.

The multi-year experience of private plans in Medicare provides insight into the implications of choice for older adults and people with disabilities on Medicare. By its nature, the structure of the Medicare Advantage program and its reliance on competition among private plans demands much of plan enrollees, particularly if they want to maximize Medicare’s value.  Since firms can make changes to their plans each year (e.g., premiums, cost-sharing, extra benefits and provider networks), each year’s choices bring potentially significant changes for beneficiaries to consider that can be particularly challenging for beneficiaries with serious health problems or cognitive limitations.   Perhaps that is one reason why such a small share of Medicare Advantage enrollees change plans each year,¹⁰  unless confronted with relatively steep premium increases.

While Medicare Advantage has been relatively stable in recent years, it was not always so.  Beneficiaries experienced considerable disruption in the late 1990s and early 2000s when firms departed many markets and reduced benefits under the Medicare +Choice program, the predecessor program to Medicare Advantage.¹¹   The current stability in the Medicare Advantage market has benefited considerably from the current payment system which, even after the ACA payment reductions, pays plans, on average, 102 percent of the cost of coverage under traditional Medicare.  Some lawmakers are now proposing to transform Medicare into a premium support system, building off of Medicare Advantage.  A premium support system could be a major departure from the current program due to many factors, including a change in federal payments to plans and plans’ financial incentives, which would have uncertain effects for plans and beneficiaries.

1. See Jacobson G, Damico A, Neuman T, and Gold M. “Medicare Advantage 2016 Spotlight: Enrollment Market Update.” Kaiser Family Foundation.  June 2016. https://modern.kff.org/medicare/issue-brief/medicare-advantage-2016-spotlight-enrollment-market-update/ ↩︎
2. Jacobson G, Trilling A, Neuman T, Damico A, and Gold G. “Medicare Advantage Hospital Networks: How Much Do They Vary?” Kaiser Family Foundation. June 2016. https://modern.kff.org/medicare/report/medicare-advantage-hospital-networks-how-much-do-they-vary/ ↩︎
3. Medicare Payment Advisory Commission. “Medicare Advantage Program Payment System.” October 2016. http://www.medpac.gov/docs/default-source/payment-basics/medpac_payment_basics_16_ma_final.pdf ↩︎
4. Medicare Payment Advisory Commission (MedPAC) “Report to the Congress: Medicare Payment Policy,” March 2016, available at http://www.medpac.gov/docs/default-source/reports/chapter-12-the-medicare-advantage-program-status-report-march-2016-report-.pdf. ↩︎
5. For example, see Gold M, Jacobson G, Damico A, and Neuman T, “Medicare Advantage 2016 Spotlight: Enrollment Market Update.” May 2016. https://modern.kff.org/medicare/issue-brief/medicare-advantage-2016-spotlight-enrollment-market-update/ ↩︎
6. Jacobson G, Neuman T, and Damico A. “Medicare Advantage Plan Switching: Exception or Norm?” Kaiser Family Foundation. September 2016. https://modern.kff.org/medicare/issue-brief/medicare-advantage-plan-switching-exception-or-norm/ ↩︎
7. See Gold M, Hudson M, Jacobson G, and Neuman T, “Medicare Advantage 2010 Data Spotlight: Benefits and Cost-Sharing.” February 2010. https://modern.kff.org/medicare/issue-brief/medicare-advantage-2010-data-spotlight-benefits-and/ ↩︎
8. Hoadley J, et al. “Medicare Part D: A First Look at Prescription Drug Plans in 2017” Kaiser Family Foundation. October 2016. http://files.kff.org/attachment/Issue-Brief-Medicare-Part-D-A-First-Look-at-Prescription-Drug-Plans-in-2017 ↩︎
9. For a list of the counties, see Jacobson G, Neuman T, Damico A, and Huang J. “Medicare Advantage Plan Star Ratings and Bonus Payments in 2012.” November 2011. https://modern.kff.org/medicare/report/medicare-advantage-2012-star-ratings-and-bonuses/ ↩︎
10. Jacobson G, Neuman T, and Damico A. “Medicare Advantage Plan Switching: Exception or Norm?” Kaiser Family Foundation. September 2016. https://modern.kff.org/medicare/issue-brief/medicare-advantage-plan-switching-exception-or-norm/ ↩︎
11. For example, see Gold, M. Interim Report Card on Medicare+Ch0ice, Health Aff July 2001 20:4120-138; and M. Gold, L. Achman, J. Mittler, and B. Stevens.“Monitoring Medicare+Choice: What Have We Learned?”  Washington DC: Mathematica Policy Research April 2004. https://www.mathematica-mpr.com/our-publications-and-findings/publications/monitoring-medicarechoice-what-have-we-learned-findings-and-operational-lessons-for-medicare-advantage   ↩︎

The Kaiser Health Policy News Index is designed to help journalists and policymakers better understand which health policy-related news stories Americans are following, and what the public knows about health policy issues covered in the news. It also looks at how attention to health policy news stories compares to other national news stories.

Health Policy Stories v. National News Stories

Table 1 below presents the top news stories of 2016, as determined by the percent of Americans who said they followed news coverage related to each story “very” or “fairly” closely in monthly Kaiser tracking polls. The major news stories that dominated this past year and captivated Americans’ attention range from multiple conflicts involving police officers to the various scripted and unscripted events of the 2016 presidential election.

As seen in the table, health policy news stories were never the most closely followed news stories. Across the ten Kaiser Health Tracking Polls conducted between January and November 2016, the presidential campaign was the top news story in more than half of these surveys. On average, more than seven in ten Americans said they were closely following news about the election each month.

Although the election was certainly the biggest national story of 2016, there were several major health policy stories that made news this year, including the unsafe levels of lead in Flint, Michigan’s water supply and the Zika virus outbreak. The year was bookended by stories about Republican lawmakers and the Affordable Care Act, with January’s top health story being President Obama vetoing repeal of the law and November’s top health story being Republican lawmakers’ plans to repeal the law once President-elect Trump is in office.

Overall, the top three most closely-followed news stories in 2016 were the attack at an LGBT night club in Orlando, Florida (85 percent reported following this story closely in June), the 2016 presidential campaign (83 percent in July), and the fatal police shootings of black men (81 percent in July). The top three most closely followed health policy news stories in 2016 were the unsafe levels of lead in Flint, Michigan’s drinking water (70 percent in April), Republicans post-election plans to repeal the Affordable Care Act (70 percent in November), and the Zika virus outbreak (64 percent in October).

A Closer Look at Some of the Top Health Policy News Stories

In addition to tracking which health policy-related news stories Americans are following, the Kaiser Health Tracking Polls also examines what the public knows about health policy issues covered in the news. In 2016, we examined Americans’ awareness of and attitudes towards several of the health policy stories in the news.

Flint, Michigan Water Crisis

While Flint, Michigan began using the Flint River as its water source in April 2014, serious concerns about the level of lead in the city’s drinking water supply did not emerge until 2015. The Kaiser Family Foundation began tracking Americans’ attention to news about the unsafe levels of lead in Flint’s water supply in February 2016, and the story ranks as one of the top health policy news stories of the year. One of the main findings from our survey work during this time was the lack of confidence that Americans had in their state governments to ensure the safety of public services; in April, about three in ten (29 percent) reported being ‘extremely’ or ‘very’ confident that their state government can ensure the safety of public water supplies over the next five years while seven in ten reported being either “somewhat confident” or “not all confident.”

News about the Affordable Care Act

The year began with Republican lawmakers voting to repeal the Affordable Care Act (ACA), only to have President Obama veto the bill.¹  And with the election of Republican presidential candidate Donald Trump, the year is ending with reenergized efforts to repeal this legislation and accompanying uncertainty about the future of the U.S. health care system. Throughout 2016, Americans have paid varying degrees of attention to news stories about different aspects of the ACA, with news about Republican post-election plans to repeal the law (70 percent reported following this story closely in November), reports about rising health insurance premiums (61 percent in June), and the number of Americans without health insurance (58 percent in September), having the largest share of individuals who reported following news about these stories closely.

Partisans Vary In Perceptions of How Media Cover the ACA

As with almost everything associated with the ACA, Americans’ attitudes of how the news media cover the law are largely dependent on party affiliation. As seen in August, not only do Republicans, Democrats, and independents have very different views towards the law – they also have different views on how the media cover the law. Nearly half (47 percent) of Republicans said the coverage was biased in favor of the law while half of Democrats and 43 percent of independents said the news coverage was mostly balanced.

Zika Virus Outbreak

The Kaiser Family Foundation started tracking Americans’ attention to the Zika virus outbreak beginning in February 2016, when the World Health Organization first declared the virus to be an international public health emergency.²  Throughout 2016, the Zika virus outbreak was one of the most followed health stories, with about six in ten of the population from February through October saying they followed news about the virus closely.

Our polls this year have also measured overall knowledge of the ways the virus spreads, the effects of the virus, and support for Congressional funding aimed at reducing the impact of the virus. Overall, the surveys found that although Americans said they were paying close attention to the virus (especially during the summer months), very few reported that they were personally affected. The September Kaiser Health Tracking Poll found that while a vast majority of Americans have heard or read about the Zika virus, very few (2 percent) said they personally knew anyone whose health had been affected by the virus.

For more findings from our survey research on Zika, visit our Zika slideshow.

The U.S. Heroin and Prescription Painkiller Epidemic

Throughout 2016, the news media has covered stories about the increase in Americans’ use of heroin and prescription painkillers, and the increase in overdose deaths related to these drugs. News stories about the opioid epidemic included specific events such as the announcement of the Centers for Disease Control and Prevention’s new guidelines for prescribing prescription painkillers in March³  and more general stories about how the epidemic is affecting individuals and communities. The Foundation began tracking Americans’ attention to the epidemic in June. Since then, with the exception of one month, at least half of the public have reported closely following news stories related to the epidemic.

In addition to tracking attention to these stories, several of our surveys examined the public’s attitudes toward, and experiences with, the prescription painkiller epidemic, including the November Kaiser Health Tracking Poll, which found that nearly half of Americans said they knew someone who had been addicted to prescription painkillers, including 2 percent who said it was themselves who was addicted.

In addition, a partnership survey with The Washington Post took a closer look at U.S. adults who were long-term users of prescription painkillers and found that one in three (34 percent) long-term opioid users reported being physically dependent or addicted.

Prescription Drug Prices

Another major health story, followed by most Americans this year, has been news about the rising costs of prescription drugs – most notably, coverage about an increase in cost for the EpiPen. The October Kaiser Health Tracking Poll found that about six in ten Americans reported following news about the increase in cost for the EpiPen, which was similar to the share who reported following more general news about the rise in prescription drug costs in the November Kaiser Health Tracking Poll.

In light of the recent media attention on rising prescription drug costs, we have also been tracking Americans’ perceptions of prescription drug costs and find that these perceptions have changed over time. For example, in September 2016, we found a larger share of Americans said they think prescription drug prices were unreasonable compared to those who said they were unreasonable a year earlier.

More data on public opinion on prescription drugs and their prices is available in a summary slideshow.

The Kaiser Family Foundation tracks the public’s attention to and awareness of the top health policy stories using the Health Policy News Index (HPNI) in each month’s tracking poll. To develop the HPNI, researchers track the top news stories and top health policy news stories on a daily basis over a one-month period to assess which are the top news stories. The top news stories and top health policy news stories are measured separately. In order to gather the top news stories during the month, data is collected daily on the top five news stories as determined by Google News. The top health policy news stories are gathered using the Morning Briefing produced by Kaiser Health News, an editorially independent program of the Foundation. Each weekday during the month, Foundation researchers tally the number of stories appearing in the Morning Briefing from 5 news organizations (The Associated Press, The Washington Post, USA Today, The New York Times, and The Wall Street Journal). All news and related stories are coded by researchers to reflect the basic type of news story and the subject the story addresses. Those topics that were covered in the largest number of stories are tallied and the most common stories of the month are then included in the HPNI. The number of stories included in the HPNI vary each month depending on the number of stories that have garnered national news attention.

Following the news-tracking period, a question about how closely the public followed each of the stories in the HPNI is included on the monthly Kaiser Health Tracking Poll, a nationally representative dual frame telephone survey (landline and cell phone) of U.S. adults ages 18 and over, conducted in English and Spanish. Each tracking poll interviews a minimum of 1,200 respondents. Detailed methodological information about each month’s poll is available at https://www.kff.org/tag/tracking-poll/.

1. The U.S. Senate passed the legislation on December 3, 2015 and the House passed the legislation on January 6, 2016. President Obama vetoed the legislation on January 8, 2016. ↩︎
2. The New York Times, “Zika Virus a Global Health Emergency, W.H.O. Says,” February 2016. http://www.nytimes.com/2016/02/02/health/zika-virus-world-health-organization.html. The World Health Organization has since lifted the designation. ↩︎
3. JAMA, “CDC Guideline for Prescribing Opioids for Chronic Pain- United States, 2016,” April 2016, http://jamanetwork.com/journals/jama/fullarticle/2503508 ↩︎

The 2010 Affordable Care Act (ACA) included many provisions affecting the Medicare program and the 57 million seniors and people with disabilities who rely on Medicare for their health insurance coverage. Such provisions include reductions in the growth in Medicare payments to hospitals and other health care providers and to Medicare Advantage plans, benefit improvements, payment and delivery system reforms, higher premiums for higher-income beneficiaries, and new revenues.

President-elect Donald Trump, Speaker of the House Paul Ryan, Health and Human Services (HHS) Secretary-nominee and current House Budget Committee Chairman Tom Price, and many other Republicans in Congress have proposed to repeal and replace the ACA, but lawmakers have taken different approaches to the ACA’s Medicare provisions. For example, the House Budget Resolution for Fiscal Year 2017, introduced by Chairman Price in March 2016, proposed a full repeal of the ACA. The House Republican plan, “A Better Way,” introduced by Speaker Ryan in June 2016, proposed to repeal some, but not all, of the ACA’s Medicare provisions.

This brief explores the implications for Medicare and beneficiaries of repealing Medicare provisions in the ACA. The Congressional Budget Office (CBO) has estimated that full repeal of the ACA would increase Medicare spending by $802 billion from 2016 to 2025.¹  Full repeal would increase spending primarily by restoring higher payments to health care providers and Medicare Advantage plans. The increase in Medicare spending would likely lead to higher Medicare premiums, deductibles, and cost sharing for beneficiaries, and accelerate the insolvency of the Medicare Part A trust fund. Policymakers will confront decisions about the Medicare provisions in the ACA in their efforts to repeal and replace the law.

What are the key Medicare provisions in the ACA and how would repeal affect Medicare spending and beneficiaries?

The following discussion highlights several of the key Medicare provisions in the ACA and assesses how repeal of these provisions could affect Medicare spending and beneficiaries.² 

Payments to Health Care Providers

The ACA reduced updates in Medicare payment levels to hospitals, skilled nursing facilities, hospice and home health providers, and other health care providers. The ACA also reduced Medicare Disproportionate Share Hospital (DSH) payments that help to compensate hospitals for providing care to low-income and uninsured patients, with the expectation that hospitals would have fewer uninsured patients as a result of the ACA’s coverage expansions.

Repealing the ACA’s sustained reductions in provider payments would be expected to:

• Increase Part A and Part B spending. CBO has estimated that roughly $350 billion³  of the total $802 billion in higher Medicare spending over 10 years could result from repealing ACA provisions that changed provider payment rates in traditional Medicare. Repealing these provisions would increase payments to providers in traditional Medicare. Additionally, some hospitals would receive higher DSH payments, if these payments were restored to their pre-ACA levels.
• Increase the Part A deductible and copayments and the Part B premium and deductible paid by beneficiaries. The Part A deductible and copayments would be expected to increase due to an increase in Part A spending that would likely occur if payment reductions are repealed. This is because the Part A deductible for inpatient hospital stays is indexed to updates in hospital payments, and the copayment amounts for inpatient hospital and skilled nursing facility stays are calculated as a percentage of the Part A deductible. Similarly, the Part B premium and deductible would be expected to increase if payments to Part B service providers are restored. This is because Part B premiums are set to cover 25 percent of Part B spending, and the Part B deductible is indexed to rise at the same rate as the Part B premium.

Payments to Medicare Advantage Plans

Prior to the ACA, federal payments to Medicare Advantage plans per enrollee were 14 percent higher than the cost of covering similar beneficiaries under the traditional Medicare program, according to the Medicare Payment Advisory Commission (MedPAC).⁴  The ACA reduced payments to Medicare Advantage plans over six years, which brought these payments closer to the average costs of care under the traditional Medicare program. In 2016, federal payments to plans were 2 percent higher than traditional Medicare spending (including quality-based bonus payments to plans).⁵ 

Repealing the ACA’s Medicare Advantage payment changes would be expected to:

• Increase total Medicare spending as a result of increasing payments to Medicare Advantage plans relative to spending under traditional Medicare. CBO has estimated that repealing the Medicare Advantage-related provisions in the ACA would increase Medicare spending by roughly $350 billion⁶  (out of the $802 billion total increase) over 10 years.
• Increase the Part B premium and deductible paid by beneficiaries. The Part B premium and deductible would likely increase if the payment reductions for Medicare Advantage plans are repealed because the Part B premium is set to cover 25 percent of Part B spending, and the Part B deductible is indexed to rise at the same rate as the Part B premium.
• Improve benefits and lower out-of-pocket costs for beneficiaries enrolled in Medicare Advantage plans. Payments that Medicare Advantage plans receive in excess of their costs to provide Part A and Part B benefits are required to be used to provide benefits not covered by traditional Medicare, to reduce cost sharing, premiums, or limits on out-of-pocket spending, or both. Thus, if the ACA’s reductions in Medicare Advantage plan payments were repealed, plans could provide extra benefits to Medicare Advantage enrollees and/or reduce enrollees’ costs.

Medicare Benefit Improvements

The ACA included provisions to improve Medicare benefits by providing free coverage for some preventive benefits, such as screenings for breast and colorectal cancer, cardiovascular disease, and diabetes, and closing the coverage gap (or “doughnut hole”) in the Part D drug benefit by 2020. These benefit improvements increased Medicare Part B and Part D spending.

Repealing the ACA’s Medicare benefit improvements would be expected to:

• Reduce Medicare Part B spending for preventive services and reduce Part D spending on costs in the coverage gap.
• Increase beneficiary cost sharing for Part B preventive benefits.
• Increase beneficiary cost sharing by Part D enrollees who have drug spending high enough to reach the coverage gap. According to MedPAC, in 2013, roughly 25 percent of the 37.8 million Part D enrollees (or around 9 million beneficiaries) had drug spending high enough to reach the coverage gap.⁷ ,⁸ 
• Reduce Part D premiums, on average, since Part D premiums are set to cover 25.5 percent of program costs, and reinstating the Part D coverage gap would lower Part D spending.

Revenues to the Medicare Trust Funds

The ACA established new sources of revenue dedicated to the Medicare program, including a 0.9 percentage point increase in the Medicare Part A payroll tax on earnings of higher-income workers (incomes more than $200,000/individual and $250,000/couple), and a fee on the manufacturers and importers of branded drugs, which has generated additional revenue for the Part B trust fund, including $3 billion in 2015 alone.⁹ 

Repealing the ACA’s Medicare revenue provisions would be expected to:

• Reduce revenues to Medicare’s Part A and Part B trust funds.
• Reduce Part A payroll taxes for Medicare beneficiaries (and other taxpayers) with earnings greater than $200,000/individual or $250,000/couple.

Medicare Part B and Part D Premiums for Higher-Income Beneficiaries

The ACA froze the income thresholds for the Part B income-related premium beginning at $85,000/individual and $170,000/couple through 2019, which subjected a larger share of Medicare beneficiaries to the higher Part B income-related premium over time.¹⁰  The law also added a new surcharge to Part D premiums for higher-income enrollees, using the same income thresholds as Part B premiums.

Repealing the ACA’s income-related premium provisions would be expected to:

• Reduce the number of higher-income Part B enrollees paying income-related premiums.
• Reduce Part D premiums for beneficiaries with incomes above $85,000/individual and $170,000/couple.

Payment and Delivery System Reforms and New Quality Incentives

Through a new Center for Medicare & Medicaid Innovation (CMMI, or Innovation Center) within the Centers for Medicare & Medicaid Services (CMS), the ACA directed CMS to test and implement new approaches for Medicare to pay doctors, hospitals, and other providers to bring about changes in how providers organize and deliver care. The ACA authorized the Secretary of Health and Human Services to expand CMMI models into Medicare if evaluation results showed that they either reduced spending without harming the quality of care or improved the quality of care without increasing spending. CMMI received an initial appropriation of $10 billion in 2010 for payment and delivery system reform model development and evaluation, and the ACA called for additional appropriations of $10 billion in each decade beginning in 2020.

The ACA also created incentives for hospitals to reduce preventable readmissions and hospital-acquired conditions, and established new accountable care organizations (ACO) programs. Research has shown declines in Medicare patient readmissions since the Hospital Readmission Penalty Program provisions were introduced.

Repealing these ACA’s payment and delivery system reform provisions would be expected to:

• Increase Medicare spending due to elimination of CMMI and other quality incentive programs. On net, CBO has estimated that CMMI’s operations will generate savings of $34 billion over the 2017-2026 period, with gross savings of $45 billion over this period. These savings are attributed to the expansion of successful payment and delivery system reform models into Medicare. In addition to eliminating the savings generated from CMMI, Medicare spending could also increase if the incentives to reduce preventable readmissions and hospital-acquired conditions are included in proposals to repeal and replace the ACA.

Independent Payment Advisory Board

The ACA authorized a new Independent Payment Advisory Board (IPAB), a 15-member board that is required to recommend Medicare spending reductions to Congress if projected spending growth exceeds specified target levels, with the recommendations taking effect according to a process outlined in the ACA. To date, no members have been appointed to the Board. Many policymakers have expressed opposition to IPAB, and there have been several legislative attempts to eliminate it. The CMS Office of the Actuary has estimated that the IPAB process will first be triggered in 2017, based on its most recent Medicare spending growth rate projections.¹¹ 

Repealing IPAB would be expected to:

• Increase Medicare spending over time, in the absence of the Board’s cost-reducing actions. CBO projects Medicare savings of $8 billion as a result of the IPAB process between 2019 and 2026.¹² 

How would ACA repeal affect the solvency of the Medicare Hospital Insurance trust fund?

Fully repealing the ACA would accelerate the projected insolvency of the Medicare Hospital Insurance (HI) trust fund, out of which Part A benefits are paid. This would result from higher spending for Part A services due to higher payments to Part A service providers (such as hospitals) and Medicare Advantage plans for services provided under Part A, along with reduced revenues, if the additional 0.9 percent payroll tax on high earners is repealed. As a result, Medicare would not be able to fulfill its obligation to pay for all Part A-covered benefits within a shorter period of time if the ACA is repealed than if the law is retained.

Prior to enactment of the ACA in 2010, the Medicare Trustees projected that the Part A trust fund would not have sufficient funds to pay all Part A benefits beginning in 2017. Following enactment of the law, the insolvency date was extended. The current insolvency date is projected to be 2028. Repealing the ACA is expected to push up the insolvency date.

Discussion

The Medicare provisions of the ACA have played an important role in strengthening Medicare’s financial status for the future, while offsetting some of the cost of the coverage expansions of the ACA and also providing some additional benefits to people with Medicare. Savings were achieved in part by reducing payments to providers, such as hospitals and skilled nursing facilities. Medicare provider payment changes in the ACA were adopted in conjunction with the ACA’s insurance coverage expansions, with the expectation that additional revenue from newly-insured Americans would offset lower revenue from Medicare payments. In addition, Medicare savings were achieved through lower payments to Medicare Advantage plans.

Congressional action to repeal the ACA appears imminent, but it is not yet clear whether Congress will repeal the ACA in its entirety or keep certain provisions in place. Previous Congressional proposals have taken different approaches. For example, the House Budget Resolution for Fiscal Year 2017, introduced by Chairman Price in March 2016, proposed a full repeal of the ACA. The House Republican plan, “A Better Way,” introduced by Speaker Ryan in June 2016, proposed to repeal some of the ACA’s Medicare Advantage payment changes, along with repealing IPAB and CMMI, the additional Medicare payroll tax on high earners, and certain other tax and revenue provisions, but appears to retain other Medicare provisions, including changes to provider payment updates and the benefit improvements.¹³ 

A majority of Americans have expressed support for some of the ACA provisions that affect Medicare, including the elimination of out-of-pocket costs for many preventive services, closing the Part D coverage gap, and the higher Medicare payroll tax for higher-income workers.¹⁴  Some industry stakeholders have expressed concern about the implications of retaining the ACA’s savings provisions, yet repealing the ACA’s coverage expansions.

Aside from uncertainty about whether any of the ACA’s Medicare provisions will be retained, questions have arisen as to what changes policymakers could advance through the legislative process known as “reconciliation.” Policymakers are considering repealing the ACA as part of budget reconciliation legislation, which requires only a simple majority in the Senate to pass. Senate rules (the so-called “Byrd Rule”) limit the scope of reconciliation legislation to provisions with budgetary effects, including spending and revenues. Most of the Medicare provisions in the ACA have budgetary effects, according to CBO, so would likely be considered in order in the context of a reconciliation bill.

As a result of the Medicare provisions included in the ACA, Medicare spending per beneficiary has grown more slowly than private health insurance spending; premiums and cost-sharing for many Medicare-covered services are lower than they would have been without the ACA; new payment and delivery system reforms are being developed and tested; and the Medicare Part A trust fund has gained additional years of solvency. Full repeal of the Medicare provisions in the ACA would increase payments to hospitals and other health care providers and Medicare Advantage plans, which would likely lead to higher premiums, deductibles, and cost sharing for Medicare-covered services paid by people with Medicare. Full repeal would also reduce premiums for higher-income beneficiaries, and reduce payroll tax contributions from beneficiaries (and other taxpayers) with high earnings. Repealing the ACA would have uncertain effects on evolving payment and delivery system reforms. Partial repeal of the law could also have implications for Medicare spending, the Part A trust fund solvency date, and beneficiaries’ costs. Policymakers who seek to repeal the ACA may need to address the implications for Medicare, beneficiaries, and other stakeholders.

1. Congressional Budget Office, “Budgetary and Economic Effects of Repealing the Affordable Care Act,” June 2015, available at https://www.cbo.gov/publication/50252. ↩︎
2. This discussion does not include the ACA provision to eliminate the tax deductibility of the 28 percent federal subsidy, known as the retiree drug subsidy (RDS), for employers who provide creditable prescription drug coverage to Medicare beneficiaries. Repealing this provision would not have a direct effect on Medicare spending but, in allowing for the tax deductibility of RDS payments, would be accounted for as a federal tax expenditure. ↩︎
3. This $350 billion estimate is calculated from CBO’s statement that roughly one-half of the net increase in direct spending ($715 billion, between 2016 and 2025) would stem from repealing provisions that changed payment rates in the fee-for service sector. Congressional Budget Office, “Budgetary and Economic Effects of Repealing the Affordable Care Act,” June 2015, available at https://www.cbo.gov/publication/50252. ↩︎
4. Medicare Payment Advisory Commission (MedPAC) “Report to the Congress: Medicare Payment Policy,” March 2009, available at http://www.medpac.gov/docs/default-source/reports/mar09_ch03.pdf. ↩︎
5. Medicare Payment Advisory Commission (MedPAC) “Report to the Congress: Medicare Payment Policy,” March 2016, available at http://www.medpac.gov/docs/default-source/reports/chapter-12-the-medicare-advantage-program-status-report-march-2016-report-.pdf. ↩︎
6. This $350 billion estimate is calculated from CBO’s statement that roughly one-half of the net increase in direct spending ($715 billion, between 2016 and 2025) would stem from repealing provisions that changed the rules for setting payment rates for Medicare Advantage plans. Congressional Budget Office, “Budgetary and Economic Effects of Repealing the Affordable Care Act,” June 2015, available at https://www.cbo.gov/publication/50252. ↩︎
7. Medicare Payment Advisory Commission (MedPAC) “Report to the Congress: Medicare Payment Policy,” March 2016, available at http://www.medpac.gov/docs/default-source/reports/chapter-13-status-report-on-part-d-march-2016-report-.pdf. ↩︎
8. According to CMS estimates, more than 11 million Medicare Part D enrollees have received a total of $23.5 billion in savings and discounts in the coverage gap since the enactment of the ACA, with savings averaging $2,127 per enrollee over five years. See Centers for Medicare & Medicaid Services, “Medicare Advantage Premiums Remain Stable in 2017; Beneficiaries Have Saved over $23.5 Billion on Prescription Drugs,” September 22, 2016, available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-09-22.html. ↩︎
9. Table III.C1, Statement of the Operations of the Part B Account in the SMI Trust Fund during Calendar Year 2015, 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, June 2016, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf. ↩︎
10. The Part B income-related premium was established by the Medicare Modernization Act of 2003 and took effect in 2007. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) made further changes to Medicare’s income-related premiums requiring beneficiaries with incomes above $133,500 ($267,000 for married couples) to pay a larger percentage of Part B and Part D program costs than they currently pay, beginning in 2018. MACRA also included a provision to index the thresholds to inflation based on their levels in 2019. ↩︎
11. Table V.B2: Key Rates of Growth for IPAB Determination, 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, June 2016, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf. ↩︎
12. Congressional Budget Office (CBO), “March 2016 Medicare Baseline,” March 24, 2016, available at https://www.cbo.gov/sites/default/files/51302-2016-03-Medicare.pdf. ↩︎
13. See also, “A Better Way Frequently Asked Questions,” available at http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-FAQ.pdf. ↩︎
14. Ashley Kirzinger, Elise Sugarman, and Mollyann Brodie, “Kaiser Health Tracking Poll: November 2016,” Kaiser Family Foundation, December 2016, available at https://modern.kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-november-2016/. ↩︎

UPDATE: An updated version of this analysis based on 2018 data is now available. It includes estimates for non-elderly adults and households, with some breakouts by state, age and gender.

Before private insurance market rules in the Affordable Care Act (ACA) took effect in 2014, health insurance sold in the individual market in most states was medically underwritten.¹   That means insurers evaluated the health status, health history, and other risk factors of applicants to determine whether and under what terms to issue coverage. To what extent people with pre-existing health conditions are protected is likely to be a central issue in the debate over repealing and replacing the ACA.

This brief reviews medical underwriting practices by private insurers in the individual health insurance market prior to 2014, and estimates how many American adults could face difficulty obtaining private individual market insurance if the ACA were repealed or amended and such practices resumed.  We examine data from two large government surveys: The National Health Interview Survey (NHIS) and the Behavioral Risk Factor Surveillance System (BRFSS), both of which can be used to estimate rates of various health conditions (NHIS at the national level and BRFSS at the state level). We consulted field underwriting manuals used in the individual market prior to passage of the ACA as a reference for commonly declinable conditions.

Estimates of the Share of Adults with Pre-Existing Conditions

We estimate that 27% of adult Americans under the age of 65 have health conditions that would likely leave them uninsurable if they applied for individual market coverage under pre-ACA underwriting practices that existed in nearly all states. While a large share of this group has coverage through an employer or public coverage where they do not face medical underwriting, these estimates quantify how many people could be ineligible for individual market insurance under pre-ACA practices if they were to ever lose this coverage. This is a conservative estimate as these surveys do not include sufficient detail on several conditions that would have been declinable before the ACA (such as HIV/AIDS, or hepatitis C).  Additionally, millions more have other conditions that could be either declinable by some insurers based on their pre-ACA underwriting guidelines or grounds for higher premiums, exclusions, or limitations under pre-ACA underwriting practices. In a separate Kaiser Family Foundation poll, most people (53%) report that they or someone in their household has a pre-existing condition.

A larger share of nonelderly women (30%) than men (24%) have declinable preexisting conditions. We estimate that 22.8 million nonelderly men have a preexisting condition that would have left them uninsurable in the individual market pre-ACA, compared to 29.4 million women. Pregnancy explains part, but not all of the difference.

The rates of declinable pre-existing conditions vary from state to state. On the low end, in Colorado and Minnesota, at least 22% of non-elderly adults have conditions that would likely be declinable if they were to seek coverage in the individual market under pre-ACA underwriting practices.  Rates are higher in other states – particularly in the South – such as Tennessee (32%), Arkansas (32%), Alabama (33%), Kentucky (33%), Mississippi (34%), and West Virginia (36%), where at least a third of the non-elderly population would have declinable conditions.

At any given time, the vast majority of these approximately 52 million people with declinable pre-existing conditions have coverage through an employer or through public programs like Medicaid. The individual market is where people seek health insurance during times in their lives when they lack eligibility for job-based coverage or for public programs such as Medicare and Medicaid.  In 2015, about 8% of the non-elderly population had individual market insurance.  Over a several-year period, however, a much larger share may seek individual market coverage.²   This market is characterized by churn, as new enrollees join and others leave (often for other forms of coverage). For many people, the need for individual market coverage is intermittent, for example, following a 26^th birthday, job loss, or divorce that ends eligibility for group plan coverage, until they again become eligible for group or public coverage.  For others – the self-employed, early retirees, and lower-wage workers in jobs that typically don’t come with health benefits – the need for individual market coverage is ongoing.  (Figure 1 shows the distribution of employment status among current individual market enrollees.)

Prior to the ACA’s coverage expansions, we estimated that 18% of individual market applications were denied. This is an underestimate of the impact of medical underwriting because many people with health conditions did not apply because they knew or were informed by an agent that they would not be accepted.  Denial rates ranged from 0% in a handful of states with guaranteed issue to 33% in Kentucky, North Carolina, and Ohio. According to 2008 data from America’s Health Insurance Plans, denial rates ranged from about 5% for children to 29% for adults age 60-64 (again, not accounting for those who did not apply).

Medical Underwriting in the Individual Market Pre-ACA

Prior to 2014 medical underwriting was permitted in the individual insurance market in 45 states and DC.  Applications for individual market policies typically included lengthy questionnaires about the health and risk status of the applicant and all family members to be covered.  Typically, applicants were asked to disclose whether they were pregnant or contemplating pregnancy or adoption, and information about all physician visits, prescription medications, lab results, and other medical care received in the past year.  In addition, applications asked about personal history of a series of health conditions, ranging from HIV, cancer, and heart disease to hemorrhoids, ear infections and tonsillitis.  Finally, all applications included authorization for the insurer to obtain and review all medical records, pharmacy database information, and related information.

Once the completed application was submitted, the medical underwriting process varied somewhat across insurers, but usually involved identification of declinable medical conditions and evaluation of other conditions or risk factors that warranted other adverse underwriting actions. Once enrolled, a person’s health and risk status was sometimes reconsidered in a process called post-claims underwriting. Although our analysis focuses on declinable medication conditions, each of these other actions is described in more detail below.

Declinable Medical Conditions

Before the ACA, individual market insurers in all but five states maintained lists of so-called declinable medical conditions.  People with a current or past diagnosis of one or more listed conditions were automatically denied.  Insurer lists varied somewhat from company to company, though with substantial overlap.  Some of the commonly listed conditions are shown in Table 2.

Our analysis of rates of pre-existing conditions in this brief focuses on those conditions that would likely be declinable, based on our review of pre-ACA underwriting documents. Our analysis is limited – and our results are conservative – because NHIS and BRFSS questionnaires do not address some of the conditions that were declinable, and in some cases the questions that do relate to declinable conditions were too broad for inclusion. See the methodology section for a list of conditions included in the analysis.

In addition to declinable conditions, many insurers also maintained a list of declinable medications.  Current use of any of these medications by an applicant would warrant denial of coverage.  Table 3 provides an example of medications that were declinable in one insurer prior to the ACA. Our analysis does not attempt to account for use of declinable medications.

Some individual market insurers also developed lists of ineligible occupations.  These were jobs considered sufficiently high risk that people so employed would be automatically denied.  In addition, some would automatically deny applicants who engaged in certain leisure activities and sports.  Table 4 provides an example of declinable occupations from one insurer prior to the ACA.  Our analysis does not attempt to account for declinable occupations.

Other Adverse Underwriting Actions

Beyond the declinable conditions, medications and occupations, underwriters also examined individual applications and medical records for other conditions that could generate significant “losses” (claims expenses.)  Among such conditions were acne, allergies, anxiety, asthma, basal cell skin cancer, depression, ear infections, fractures, high cholesterol, hypertension, incontinence, joint injuries, kidney stones, menstrual irregularities, migraine headaches, overweight, restless leg syndrome, tonsillitis, urinary tract infections, varicose veins, and vertigo. One or more adverse medical underwriting actions could result for applicants with such conditions, including:

• Rate-up – The applicant might be offered a policy with a surcharged premium (e.g. 150 percent of the standard rate premium that would be offered to someone in perfect health)
• Exclusion rider – Coverage for treatment of the specified condition might be excluded under the policy; alternatively, the body part or system affected by the specified condition could be excluded under the policy. Exclusion riders might be temporary (for a period of years) or permanent
• Increased deductible – The applicant might be offered a policy with a higher deductible than the one originally sought; the higher deductible might apply to all covered benefits or a condition-specific deductible might be applied
• Modified benefits – The applicant might be offered a policy with certain benefits limited or excluded, for example, a policy that does not include prescription drug coverage.

In some cases, individuals with these conditions might also be declined depending on their health history and the insurer’s general underwriting approach.  For example, field underwriting guides indicated different underwriting approaches for an applicant whose child had chronic ear infections:

• One large, national insurer would issue standard coverage if the child had fewer than five infections in the past year or ear tubes, but apply a 50% rate up if there had been more than 4 infections in the prior year;
• Another insurer, which used a 12-tier rate system, would issue coverage at the second most favorable rate tier if the child had just one infection in the prior year or ear tubes, at the fifth rate tier if there had been 2-3 infections during the prior year, and at the seventh tier if there had been 4 or more infections; for some conditions, this company’s rating might depend on the plan deductible – applicants with history of ear infections would be offered the second rating tier for policies with a deductible of $5,000 or higher;
• Another insurer would issue standard coverage if the child had just one infection in the prior year or if ear tubes had been inserted more than one-year prior, apply a rate up if there were two infections in the prior year, and decline the application if there were three or more infections;
• Another insurer would issue standard coverage if the child had fewer than 3 infections in the past year, but issue coverage with a condition specific deductible of $5,000 if there had been 3 or more infections or if ear tubes had been inserted.

In a 2000 Kaiser Family Foundation study of medical underwriting practices, insurers were asked to underwrite hypothetical applicants with varying health conditions, from seasonal allergies to situational depression to HIV.  Results varied significantly for less serious conditions. For example, the applicant with seasonal allergies who made 60 applications for coverage was offered standard coverage 3 times, declined 5 times, offered policies with exclusion riders or other benefit limits 46 times (including 3 offers that excluded coverage for her upper respiratory system), and policies with premium rate ups (averaging 25%) 6 times.

Pre-existing Condition Exclusion Provisions

In addition to medical screening of applicants before coverage was issued, most individual market policies also included more general pre-existing condition exclusion provisions which limited the policy’s liability for claims (typically within the first year) related to medical conditions that could be determined to exist prior to the coverage taking effect.³ 

The nature of pre-existing condition exclusion clauses varied depending on state law.  In 19 states, a health condition could only be considered pre-existing if the individual had actually received treatment or medical advice for the condition during a “lookback” period prior to the coverage effective date (from 6 months to 5 years).  In most states, a pre-existing condition could also include one that had not been diagnosed but that produced signs or symptoms that would prompt an “ordinarily prudent person” to seek medical advice, diagnosis or treatment.  In 8 states and DC, conditions that existed prior to the coverage effective date – including those that were undiagnosed and asymptomatic – could be considered pre-existing and so excluded from coverage under an individual market policy.  For example, a congenital condition in a newborn could be considered pre-existing to the coverage effective date (the baby’s birth date) and excluded from coverage.  About half of the states required individual market insurers to reduce pre-existing condition exclusion periods by the number of months of an enrollee’s prior coverage.

Unlike exclusion riders that limited coverage for a specified condition of a specific enrollee, pre-existing condition clauses were general in nature and could affect coverage for any applicable condition of any enrollee.  Pre-existing condition exclusions were typically invoked following a process called post-claims underwriting.  If a policyholder would submit a claim for an expensive service or condition during the first year of coverage, the individual market insurer would conduct an investigation to determine whether the condition could be classified as pre-existing.

In some cases, post-claims underwriting might also result in coverage being cancelled.  The investigations would also examine patient records for evidence that a pre-existing condition was known to the patient and should have been disclosed on the application.  In such cases, instead of invoking the pre-existing condition clause, an issuer might act to rescind the policy, arguing it would have not issued coverage in the first place had the pre-existing condition been disclosed.

Discussion

The Affordable Care Act guarantees access to health insurance in the individual market and ends other underwriting practices that left many people with pre-existing conditions uninsured or with limited coverage before the law. As discussions get underway to repeal and replace the ACA, this analysis quantifies the number of adults who would be at risk of being denied if they were to seek coverage in the individual market under pre-ACA rules. What types of protections are preserved for people with pre-existing conditions will be a key element in the debate over repealing and replacing the ACA.

We estimate that at least 52 million non-elderly adult Americans (27% of those under the age of 65) have a health condition that would leave them uninsurable under medical underwriting practices used in the vast majority of state individual markets prior to the ACA. Results vary from state-to-state, with rates ranging around 22 – 23% in some Northern and Western states to 33% or more in some southern states. Our estimates are conservative and do not account for a number of conditions that were often declinable (but for which data are not available), nor do our estimates account for declinable medications, declinable occupations, and conditions that could lead to other adverse underwriting practices (such as higher premiums or exclusions).

While most people with pre-existing conditions have employer or public coverage at any given time, many people seek individual market coverage at some point in their lives, such as when they are between jobs, retired, or self-employed.

There is bipartisan desire to protect people with pre-existing conditions, but the details of replacement plans have yet to be ironed out, and those details will shape how accessible insurance is for people when they have health conditions.

Methods

To calculate nationwide prevalence rates of declinable health conditions, we reviewed the survey responses of nonelderly adults for all question items shown in Methods Table 1 using the CDC’s 2015 National Health Interview Survey (NHIS).  Approximately 27% of 18-64 year olds, or 52 million nonelderly adults, reported having at least one of these declinable conditions in response to the 2015 survey.  The CDC’s National Center for Health Statistics (NCHS) relies on the medical condition modules of the annual NHIS for many of its core publications on the topic; therefore, we consider this survey to be the most accurate means to estimate both the nationwide rate and weighted population.

Since the NHIS does not include state identifiers nor sufficient sample size for most state-based estimates, we constructed a regression model for the CDC’s 2015 Behavioral Risk Factor Surveillance System (BRFSS) to estimate the prevalence of any of the declinable conditions shown in Methods Table 1 at the state level.  This model relied on three highly significant predictors: (a) respondent age; (b) self-reported fair or poor health status; (c) self-report of any of the overlapping variables shown in the left-hand column of Methods Table 1.  Across the two data sets, the prevalence rate calculated using the analogous questions (i.e. the left-hand column of Methods Table 1) lined up closely, with 20% of 18-64 year old survey respondents reporting at least one of those declinable conditions in the 2015 NHIS and 21% of 18-64 year olds in the 2015 BRFSS.  Applying this prediction model directly to the 2015 BRFSS microdata yielded a nationwide prevalence of any declinable condition of 28%, a near match to the NHIS nationwide estimate of 27%.

In order to align BRFSS to NHIS overall statistics, we then applied a Generalized Regression Estimator (GREG) to scale down the BRFSS microdata’s prevalence rate and population estimate to the equivalent estimates from NHIS, 27% and 52 million.  Since the regression described in the previous paragraph already predicted the prevalence rate of declinable conditions in BRFSS by using survey variables shared across the two datasets, this secondary calibration solely served to produce a more conservative estimate of declinable conditions by calibrating BRFSS estimates to the NHIS.  After applying this calibration, we calculated state-specific prevalence rates and population estimates off of this post-stratified BRFSS sample.

The programming code, written using the statistical computing package R v.3.3.2, is available upon request for people interested in replicating this approach for their own analysis.

1. In 2013, five states – Maine, Massachusetts, New Jersey, New York, and Vermont – required all non-group health insurance policies to be offered on a guaranteed issue basis (meaning applicants could not be denied based on health status) with community rating (meaning premiums could not vary based on health status). ↩︎
2. See, for example, L Duchon, “Security Matters: How Instability in Health Insurance Puts US Workers at Risk,” The Commonwealth Fund, 2001.  There has also been a long-term decline in employer offer rates. See Kaiser Family Foundation “Diminishing Offer and Coverage Rates Among Private Sector Employees” available at https://modern.kff.org/private-insurance/issue-brief/diminishing-offer-and-coverage-rates-among-private-sector-employees/ ↩︎
3. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), eligible individuals who had at least 18 months of continuous prior coverage, who were leaving group health plan coverage, and who met other requirements, had to be offered non-group policies on a guaranteed issue basis with no pre-existing condition exclusions.  HIPAA gave insurers flexibility to limit the number of guaranteed issue policies to two.  In addition, HIPAA gave states flexibility to offer eligible individuals an alternative source of individual market coverage, such as high-risk pool coverage, which most states elected to do.  See Kaiser Family Foundation State Health Facts.   ↩︎