3 Things You Need to Know About Medicare Advantage Today

3 Things You Need to Know About Medicare Advantage Today

Medicare Advantage is the fastest-growing health insurance product. Enrollment has more than doubled since 2010, but it is adding to the financial headwinds for hospitals and health systems and impacting overall financial sustainability, all while we continue to see increased pressures for payor consolidations.

In 2023, for the first time, more than half of the 65 million eligible members enrolled in Medicare Advantage (MA) over traditional Medicare. Estimates project that by 2030, more than 60% of eligible members will be enrolled in Medicare Advantage. Given the growing prevalence, keeping a close eye on MA trends and the impact on your system is critical. So, what’s on the horizon, and what’s happening today? Read on for three trends driven by MA that are defining revenue dynamics for healthcare organization today.

1. Consolidation & Acquisition

At the national level, the Medicare Advantage market is becoming more concentrated, though concentration at the local level has declined some since 2010, the Federal Trade Commission (FTC) found. UnitedHealthcare, CVS, and Humana accounted for 58% of Medicare Advantage enrollment in 2023, up from 32% in 2008. At the local level, most markets are considered “highly concentrated” as defined by the FTC, with the three largest insurers accounting for 83% of the market on average.

The most recent example of consolidation is Cigna Group, which is selling its Medicare business to Health Care Service Corp. (HCSC) for $3.3 billion. HCSC already has 1 million Medicare beneficiaries. Cigna’s businesses will bring in 3.6 million Medicare beneficiaries (600,000 in MA). HCSC’s footprint spans five markets (Illinois, Montana, New Mexico, Oklahoma, and Texas). Now with Cigna MA, it has product in 29 states and a prescription drug plan in all 50, creating overlap in four out of five of HCSC’s states for MA.

What Does This Mean for HCSC?

A company that prided itself on its local approach just became a national player overnight in Medicare Advantage. HCSC will be building new relationships with providers from the ground up. Staffing, claims, and policies will all need to be redefined.

2. Payment Rates Disputes

The dollars in Medicare Advantage are disproportionately benefitting payors. The average gross margin per Medicare Advantage member for payors was $1,730, while health systems lose 24 cents for every Medicare Advantage dollar they spend if they are contracted at only 100% of Medicare. Health systems lose 19 cents per every dollar they spend on traditional Medicare. If systems are contracted at 100% of Medicare for Medicare Advantage, they are losing an additional 10%, or 24 cents total, because of denials.

Health systems and hospitals across the country are reevaluating their contracts with private Medicare Advantage insurers and making their future participation in plans contingent on payors agreeing to reasonable rates. Among the 58 publicly known contract disputes between insurers and providers in 2023, 35 — more than half — involved Medicare Advantage carriers.

We are seeing more disputes lead to out-of-network situations or, in a few cases, providers having to pull out of Medicare Advantage completely. St. Charles Health System in Bend, Oregon, cut ties with all Medicare Advantage plans in 2023 but came to terms with a few health plans. Brookings Health System in South Dakota will no longer be in network with nearly all Medicare Advantage plans in 2024, with the exception of Medica.

“The difference between original Medicare and Medicare Advantage is vast,” Jason Merkley, Brookings CEO, told Wendell Potter.

3. Increased Utilization

Payors have not held back from talking about how their profits will be impacted by seniors finally utilizing their benefits since the pandemic.

  • Molina executives cited increased costs for missing their 2023 fourth-quarter profitability target.
  • UnitedHealthcare reported cost pressures due to higher utilization in early 2024.
  • And Humana announced cost-cutting plans to offset 2023 fourth-quarter losses.

How Will Payors Adapt to New Utilization?

We’ll see a rise in denials and stiffer utilization management. Utilization typically means good things for providers, but health systems lose 24 cents per MA patient if they are contracted at 100% of CMS/traditional Medicare, and if their MA patient mix continues to increase, their losses will, too — unless they pull out of MA completely or contract at higher rates with payors on MA.

Two specialties continue to dominate growth: orthopedics and cardiology. This means providers need to:

  • Contract at rates that at least yield traditional Medicare, meaning they need to contract around 110-115% of CMS.
  • Prioritize key areas of growth and utilization like orthopedics and cardiology during negotiations.
  • Invest in growth strategies in these service areas, such as HRAs and marketing.

Unlock Health’s Take: A Proactive Approach to Medicare Advantage

Act Now

Tides are changing, and health systems need to be proactive to set themselves up for success. Each system’s circumstances are different. Trends and industry news can help inform your overall strategy, but understanding the granularities of your specific MA contracts will empower you to chart the best course of action moving forward.

Ensure You Have the Right Data

Your strategy is only as good as your data sources and your analysis. Developing and evaluating your data is critical to effectively respond to MA changes. Partner with experts to gather and synthesize the data you need to truly understand your current MA yield and make informed decisions about your MA strategy.

By implementing proactive strategies tailored to each Medicare Advantage partner, health systems can enhance their potential for future revenue growth and ensure greater financial stability while participating in Medicare Advantage.

Ready to Take the Guesswork Out of Your Medicare Advantage Strategy?

Unlock’s revenue strategy team offers a full suite of services geared toward getting your healthcare organization the most favorable agreements for the most sustainable, profitable growth. Our experts have experience helping health systems with:

  • Payor contract negotiation
  • Patient communication strategies​
  • Price transparency analysis ​​
  • Open enrollment marketing​
  • Crisis communications​
  • Population health management and marketing, and more

To speak with a revenue strategy expert, fill out our contact form.