Beneficiaries Switching From Traditional Medicare Helped Fuel Huge Growth In MA

Much of the growth experienced by Medicare Advantage over the last two decades can be attributed to beneficiaries switching from traditional Medicare to MA, a trend that’s accelerated in recent years, according to a study published today in Health Affairs.

“We found that switching from fee-for-service Medicare into MA, particularly by younger and healthier beneficiaries, has driven the increased share of Medicare beneficiaries enrolled in MA and has been accelerating since 2019,” write researchers with the Department of Health and Human Services.

They added that use of more recent and detailed information sets their study apart from previous research and allowed them to better analyze the switching patterns between MA beneficiaries and individuals enrolled in traditional Medicare.

Steven Sheingold, Ph.D., the director of HHS’ division of healthcare financing policy and one of the coauthors of the study, told Fierce Healthcare that the switching data wasn’t the only thing that their study confirmed.

“We really just wanted to answer the one hypothesis: That the new beneficiaries, those turning 65, were overwhelmingly choosing Medicare Advantage and that was one source of the growth in Medicare Advantage,” Sheingold said. “Anecdotally, we didn’t think that that was a supportable hypothesis.”

It turned out that it was; in 2006, 16% of those who turned 65 signed on to Medicare Advantage. In 2022, that number had climbed to 43%.

The study’s findings coincide with the plethora of data that underscores the massive growth of MA in the last two decades. Beneficiaries switching from fee-for-service Medicare to MA more than tripled between 2006 and 2022. Conversely, switching from MA to traditional Medicare decreased.

For both directions, the change rates accelerated since 2019, the study found. The portion of MA enrollees who’d switched from traditional Medicare rose from 61% in 2011 to 80% in 2022.

In addition, Black, dual-eligible and disabled beneficiaries had higher odds of switching in both directions. On the other hand, younger and healthier beneficiaries had higher odds of switching from fee-for-service Medicare to MA but lower odds of switching from MA to fee-for-service Medicare, the study found.

Sheingold said that partial dual eligibles were even more likely than those who were fully dual eligible to make the swap between programs.

“They may see Medicare Advantage as a way to further help them with potential out-of-pocket spending,” he said.

Using data from the Centers for Medicare & Medicaid Services (CMS), researchers tallied the number of beneficiaries newly enrolled in MA each year, dividing these individuals into those newly eligible for Medicare and those previously eligible. They then divided these into five groups: stayers, switchers to MA, switchers to fee-for-service Medicare, beneficiaries who gained eligibility and beneficiaries who were no longer eligible. They could then identify the percentage of MA growth due to switching in from 2006 to 2022.

In addition, they looked at demographic characteristics to examine MA growth in different subcategories.

Paul B. Ginsburg, Ph.D., a professor at the University of Southern California, told Fierce Healthcare that “with MA growing rapidly, fueled by switching, the problem of inadequate risk adjustment by CMS is costing the federal government (and taxpayers and beneficiaries paying Part B premiums) extremely large amounts of money. The urgency of fixing this selection issue is increasing rapidly.”

Ginsburg cites two studies published in June that argue for an “urgent need” to reform the MA payment system: One, in which he’s a co-author, states that overpayments in MA could top $75 billion in 2023, or 20%. Another, by the Medicare Payment Advisory Commission—a panel that makes recommendations to Congress on Medicare policy—cites the inadequacy of the model for adjusting for differences in likely health spending between switchers and stayers.

Ginsburg sums it up: “Switchers to MA are much healthier than those not switching; switchers to FFS are less healthy.”

The study does not look at the underlying reasons for switching, which could be attributed to anything from lower premiums or more services offered by MA plans to aggressive marketing campaigns on the part of those plans.

Researchers also did not look at possible involuntary reasons for switching, such as beneficiaries who switched because they moved. In addition, they measured MA enrollment by comparing rates in December of one year to December of the next and did not measure what might have occurred month over month.

“Scenarios such as people who turned 65 in January and enrolled in MA but died in November of that year were not captured in our data, although such scenarios constitute only 4% of the people who gained eligibility by turning 65 in 2022,” the study said.

Researchers did a deeper dive into the data in 2022, where they looked at demographic and health characteristics of switchers month to month and qualifying events such as turning 65, being disabled for two years or retiring recently and losing employer-sponsored health insurance.

Black beneficiaries, at 15.6%, had the highest rate of switching from traditional Medicare to MA, closely followed by Hispanic beneficiaries at 15%. At 6.4%, whites had the lowest rate. Disabled beneficiaries notched the highest rates in both switching from traditional Medicare to MA (12.4%) and from MA to traditional Medicare (1.8%) compared to those who aged into Medicare (6.1% and 1%, respectively).


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