Medicare Advantage risk selection

Mortality graph

One of the concerns about Medicare Advantage (MA) is that it doesn’t serve sick beneficiaries well, motivating some of them to switch to traditional Medicare (TM). If true, it’s an argument for maintaining affordable access to TM.

There’s considerable evidence that it is true. The most recent (if you can call last summer recent) is found in a paper by Elizabeth Goldberg and colleagues. They examined Medicare beneficiaries 65 years or older between 2000 and 2012, a period during which enrollment in MA grew from 19% of beneficiaries to 28%. For each year, they classified a beneficiary as “MA” if enrolled in an MA plan in January of that year, and “TM” otherwise. Note, however, that it wasn’t until 2006 that beneficiaries had to stick with their plan choice for most of the year (lock-in). Nowadays, they can adjust their plan choice only until mid-February. Prior to 2006, they could switch plans every month.

TM has no Part A (hospital insurance) premium and it’s standard Part B (physician services insurance) premium is 25 percent of program costs, or $134 per month in 2017. The premium is higher for individuals and couples with higher income. Both parts include considerable cost sharing and both have an open network and impose no managed care-type restrictions on utilization. Though MA plans tend to fill in much of Medicare’s cost sharing, as well as offer supplemental benefits at little to no additional premium, they usually have limited networks and attempt to manage care. It’s these latter features that can make TM more attractive than MA to sicker beneficiaries.

Older studies also found that sicker people tended to prefer traditional Medicare and were more likely to leave Medicare H.M.O.s. And other, more recent studies found that lower-income, less educated and sicker people reported worse experiences in Medicare Advantage than in traditional Medicare.

My takeaway from all this is that MA may promote efficiency and higher quality care, but it doesn’t serve some types of sicker beneficiaries as well as TM. They vote with their feet and leave MA when TM appears relatively more attractive. Though not without cost, this degree of choice — that spans both private and public options — is a strength of Medicare and a large benefit to its beneficiaries, while remaining the focus of intense political attention.


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