MA markets getting less crowded, but to minimal cost benefit

More competition led to higher payments

The government created the MA program to create competition within the Medicare space. Payments to the payers for participating would also be competitive through a bidding process.

However, MA has never achieved its goal of saving the Medicare program money, researchers stated. The Medicare Payment Advisory Commission even estimated that plans are currently overpaid by about 20%, meaning beneficiaries cost the Medicare program 20% more than they would in traditional Medicare.

The study suggested that even slight increases in competition did not significantly bring down MA payments. In fact, researchers found that county average Medicare payments to MA plans increased from $734 per month in 2013 to $856 in 2021, representing a 16.6% increase. The payments covered Parts A and B, standardized to a 1.0 risk score, they added.

Researchers also observed the highest Medicare payments in areas with the most concentration, although "not by a substantial amount."

Overall, reduced concentration of MA payers led to lower Medicare payments to plans. For each 1,000-point decrease in HHI, researchers reported, payments fell by $3.80 per member per month. However, this value does not significantly impact average payments, which exceeded $730 per month.

Competition and value to beneficiaries

Competition also had an effect on the value of MA plans to beneficiaries. In the study, the additional monthly premium that beneficiaries paid above their automatic Part B premium increased initially, from $41 in 2013 to $47 in 2017. Then, premiums declined thereafter to around $16 in 2023.

Additionally, out-of-pocket maximums increased from $4,838 in 2013 to $5,867 in 2018, after which they declined to $5,284 by 2023. MA rebates and Part D deductibles also increased during the period.

Researchers said that overall, plan value measured by out-of-pocket maximums declined at first, but then improved after 2018. However, market conditions mattered.

For example, the additional premiums above the automated Part B payment were lowest in the least concentrated markets at about $16. In the most concentrated markets, the extra monthly premium was nearly double at $30.

Rebates were also higher in less concentrated markets, or markets where there was more competition and bids were lower.

Additionally, out-of-pocket spending maximums were lower in less concentrated markets, according to the study.

Notably, prescription drug plan deductibles did not follow a straight trend. The deductibles were lower in the middle two markets at $233 and $237, respectively, versus $291 in the most concentrated market and $300 in the least concentrated market.

Why isn't competition helping Medicare Advantage save?

Greater competition in MA should lead to more desirable program results. However, researchers pointed out that the quantitative effects of reduced payer concentration were modest. They concluded that a lower concentration had little effect on plan bidding and the characteristics of MA plans.

Given that MA markets remained relatively concentrated, even with the large decline in HHI over the period, the relative impact of reduced competition isn't surprising, they explained. A more plausible explanation for even the small improvements is that Medicare "bought" them.

"It bought them by paying plans substantially more to cover enrollees in MA than it would have paid for the same enrollees under traditional Medicare," researchers wrote in the study. "The overly generous payments, in turn, motivated insurers to expand into new markets and created surplus partially used to finance lower premiums, lower beneficiary cost sharing, and more additional benefits than would otherwise have been the case."

For MA to achieve greater value to Medicare and its beneficiaries, researchers called for "substantial reforms."