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JAMA Forum
May 5, 2022

The Future of Medicare Advantage

Author Affiliations
  • 1Project HOPE, Bethesda, Maryland
JAMA Health Forum. 2022;3(5):e221684. doi:10.1001/jamahealthforum.2022.1684

As of the fall of 2021, of the 62 million beneficiaries enrolled in Medicare, 26 million (42%) were enrolled in Medicare Advantage (MA), which are plans offered by private companies that have been approved by the Centers for Medicare & Medicaid Services (CMS) to serve Medicare beneficiaries. More than 5 million of the MA enrollees are retirees in employer-sponsored plans. Medicare Advantage will likely enroll the majority of beneficiaries by 2030,1 making it the dominant delivery system used in Medicare.

Medicare Advantage plans are required to offer the benefits in traditional Medicare (ie, Medicare Parts A and B), which include inpatient and outpatient hospital care, physician care inside and outside the hospital, laboratory care, durable medical equipment, and a limited amount of home care. Most MA plans (89%) also offer Part D prescription drug coverage. According to the Kaiser Family Foundation, most MA plans (59%) do not charge beneficiaries any additional premium beyond what they would pay for Part B—a minimum of $170 per month in 2022, a figure that rises with income.

The large and growing share of beneficiaries in MA and the diminishing share of those enrolled in traditional Medicare is consistent with the philosophy underlying the structure of Medicare when the program was established in 1965. Specifically, when older Americans retire, they should have health insurance that is similar to the type of insurance they had while working. For the first 20 years of Medicare that meant fee-for-service plans similar to the high-option Blue Cross Blue Shield plans—what we now label traditional Medicare. However, by the late 1980s and into the 1990s, the use of health maintenance organizations (HMOs) grew substantially as did preferred provider organizations (PPOs) in employer-sponsored plans. This trend meant that traditional Medicare was no longer the type of insurance that individuals who were reaching retirement age had while they were in the workplace.

There are ongoing debates about the similarities between individuals who enroll in MA plans and the general population of Medicare beneficiaries and also about whether MA is more or less costly than traditional Medicare for the federal government. The characteristics of people enrolling in MA are straightforward to assess. Whether MA costs the government more than would be spent if these individuals had enrolled in traditional Medicare depends on whether there is “favorable selection” (for people who are systematically healthier) of enrollees in MA and whether it is appropriately addressed by the risk-adjustment measures that CMS uses to deal with differences in beneficiary health levels. It is more complex to determine the appropriate response for people who choose to stay in MA and whether they are healthier (or sicker) than those who choose traditional Medicare because it is unclear whether the MA plans are responsible for any difference in health outcomes over time.

Beneficiaries who are enrolled in traditional Medicare have characteristics that are similar to those in MA plans if the 4 million beneficiaries who are in special needs plans (or SNPs) are excluded. The SNPs are limited to people who either have specific medical conditions or who are dually eligible for Medicare and Medicaid. When the SNP population is excluded, MA enrollees and traditional Medicare enrollees look similar in terms of age, race, income, and chronic conditions. If the MA enrollees in SNPs are included, MA enrollees are more likely to be Black or Hispanic and to have chronic health conditions such as diabetes.2 A recent systematic review found that MA enrollees report more preventive care visits, fewer hospitalizations and emergency department visits, shorter hospitalizations, and lower spending compared with those in traditional Medicare—but found that readmission rates or mortality rates did not differ. Because these findings represent a compilation of studies and most studies exclude people in SNPs, they primarily reflect people who are not in such plans.3

Some payments to MA plans are deliberately set higher, in a non–budget-neutral manner, to reward for higher quality as determined by the star rating program. Medicare uses information from satisfaction surveys, the plans, and the physicians who provide care to determine member access to preventive services, care for chronic diseases, as well as overall satisfaction with the service provided. For most counties, receiving 4 or 5 stars means that the CMS will pay plans a 5% bonus. In some urban counties (known as double-bonus counties), health plans with 4 or 5 stars receive a 10% bonus.

Aside from these explicit nonneutral payments to MA plans, several analysts have raised concerns about whether and how much more MA plans spend for enrollees relative to what traditional Medicare spends for comparable beneficiaries.4,5 Most of the debate has centered around the risk adjustment system used by the CMS and whether it may be exploited so that MA plans can offer extra benefits to attract beneficiaries. Initially, the argument had focused on whether plan administrators had been reporting enrollee diagnoses more comprehensively compared with physicians billing traditional Medicare, making MA plan beneficiaries appear sicker than they are relative to enrollees in traditional Medicare and leading to higher payments from the CMS.

However, starting in 2022, the CMS uses only encounter data to calculate its risk adjustment for both MA and Part D plans. Questions have already been raised about the accuracy of encounter data,6 although in my experience as a former administrator of the Health Care Financing Administration (renamed the CMS in 2001), we regarded encounter data as the most accurate data available to the agency. It may be desirable to validate information from encounter data to bring clarity to this issue.

Medicare was created with the intent of providing retirees with health insurance coverage comparable with the coverage they received while working, but few people retiring into Medicare now have had experience with an indemnity plan similar to traditional Medicare. Continuing the philosophy underlying the creation of Medicare means that MA, with its offerings of HMO and PPO network plans, will and should become the dominant form of Medicare for future generations of retirees. This will pose challenges for policy makers because the impending dominance of MA makes its reliance on traditional Medicare for calculating capitation payments an anachronism that needs to be replaced, perhaps with a competitive bidding process. Replacing the pricing system is among the thornier issues that policy makers will need to address, along with safeguards such as network adequacy and appropriate quality metrics that need to be in place to protect future beneficiaries.

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Article Information

Published: May 5, 2022. doi:10.1001/jamahealthforum.2022.1684

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2022 Wilensky GR. JAMA Health Forum.

Corresponding Author: Gail R. Wilensky, PhD, Project HOPE, 2807 Battery Pl NW, Washington, DC 20016 (gwilensky@projecthope.org).

Conflict of Interest Disclosures: Dr Wilensky reported serving as a board director for United HealthGroup, Quest Diagnostics, and ViewRay.

Freed  M, Binick  JF, Damico  A,  et al. Medicare Advantage in 2021: enrollment update and key trends. Published June 21, 2021. Accessed May 2, 2022. https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-enrollment-update-and-key-trends/
Jacobson  G, Cicchiello  A, Sutton  J,  et al. Medicare Advantage vs traditional Medicare: how do beneficiaries’ characteristics and experiences differ? Published October 14, 2021. Accessed May 2, 2022. https://www.commonwealthfund.org/publications/issue-briefs/2021/oct/medicare-advantage-vs-traditional-medicare-beneficiaries-differ
Agarwal  R, Connolly  J, Gupta  S, Navathe  AS.  Comparing Medicare Advantage and traditional Medicare: a systematic review.   Health Aff (Millwood). 2021;40(6):937-944. doi:10.1377/hlthaff.2020.02149PubMedGoogle ScholarCrossref
Ginsburg  PB, Lieberman  SM. The debate on overpayment in Medicare Advantage: pulling it together. Published February 24, 2022. Accessed May 2, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20220223.736815
McWilliams  JM. Don’t look up? Medicare Advantage’s trajectory and the future of Medicare. Published March 24, 2022. Accessed May 2, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20220323.773602/
Creighton  S, Duddy-Tenbrunsel  R, Michel  J. The promise and pitfalls of Medicare Advantage encounter data. Published February 25, 2019. Accessed May 2, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20190221.696651
9 Comments for this article
Long-Term Potential for Medicare Advantage (MA)
Paul Keckley, Ph.D. | Editor, The Keckley Report
Notwithstanding Dr. Wilensky's COI as a Director of the largest MA plan sponsor (United Healthcare Group), it is MA's potential as a platform for holistic, multi-year care management contracts between providers and consumers that's compelling. Traditional Medicare mistakenly overlooked social determinants, non-allopathic treatment modalities, and recognition that individuals are capable of acting rationally in caring for themselves or others if valid and reliable tools are accessible to them. MA can be the transformative catalyst needed in the health system, but it must distance itself from legacy limitations and shortcomings in traditional Medicare.
Gaming Medicare Advantage
Paul Buehrens, MD | Family Medicine, Self-employed
Gail Wilensky's comments on Medicare Advantage are timely and cogent, and she has a wealth of experience. As a 39-year practicing family doctor and proponent of MA plans in our Clinically Integrated Network and previously under global capitation in the 90s, I found that traditional Medicare produced disintegrated care with redundancy and overuse. MA plans, however, can also be gamed by software that upcodes beyond what a thoughtful clinician would; adds home visits that provide no value other than a coding upgrade; and one should always keep in mind that the most expensive technology in healthcare is the physician's pen, or now keystroke, ordering whatever.

Thus the best long-term solution is the ACO that functions on a budget with risk adjustment that is not gamed, or at least minimally gamed, and with actuarial risk also taken into account for brand new vaccines, drugs, and technologies that unexpectedly put stress on the budget. ACOs on a budget will enable and indeed induce the need for the physicians to find and reduce the enormous waste in the system, while FFS payments have always done the opposite. I know, because we did it very well as competing groups of physicians under the late 90s managed care time, when insurers cut costs by denying services then, destroying public support. The ACO must either pay or see all the claims to know their costs, and therefore be in partnership with the insurer, and know the marketing, not allowing the commercial insurer to sell the plan below cost and bankrupt the ACO. Been there, done that.

Better yet, have a single payer and reduce all that insurance overhead. But put the ACOs on a budget and let the docs deal with waste.

Very Disappointed
George Bohmfalk, MD | Health Care Justice — NC, the Charlotte NC chapter of PNHP
I'm profoundly disappointed to read this opinion of a former CMS director that the future of Medicare should be privatization and profit-making. It's particularly difficult to understand this viewpoint on the heels of the CMS's own Inspector General report that MA plans have been deliberately denying and delaying payment for claims. And also difficult to separate it from her serving on the boards of for-profit healthcare industry corporations. When will more of us accept that the only viable future of healthcare is Medicare for All, not taxpayer-funded profits for some?
The Hassle Factor
Johnathon Ross, MD | Internist
Dealing with Medicare Advantage and managed care in general is a hassle for physicians and patients compared to traditional Medicare. Now we see that there is a stealth privatization of traditional Medicare by Wall Street interests called Direct Contracting Entities (DCEs). The huge profits being made by MA and DCEs without proof of better outcomes or significant savings is unforgivable. In fact, audits of MA suggest that we are overpaying these profiteers by about a billion dollars per month. If MA and DCEs were experimental treatments for cost and quality the studies would be stopped due to the harms/hassles they are creating for patients and doctors. Traditional Medicare with a good supplement was never a hassle for me as a practicing Internist. Prior authorization, confusing networks, and formularies used by MA were a daily hassle for me and my patients.
"Philosophy" of Medicare
Kenneth Dolkart, MD | Geisel School of Medicine
Dr Wilensky seeks to link "the philosophy underlying the structure of Medicare when the program was established in 1965" with the for-profit, privatized, publicly traded medical insurance and pharmaceutical benefit manager conglomerates of the deregulated health entities of the 21st century. The coverage for many wage-earners in the US in 1965 was indeed Blue Cross Blue Shield plans, which was not an equity on Wall Street, but a non-profit association of locally structured community-engaged insurance programs. In 1965, life expectancy was 68 years, and 1 in 3 older Americans were living in poverty. Wilenksy purports that Medicare was designed such that "Specifically, when older Americans retire, they should have health insurance that is similar to the type of insurance they had while working..." but it was recognized that the existing insurance entities in 1965 were not designed to cover a population with twice the hospitalization rate of a younger cohort. This is reinventing history to fit the current corporatized, venture-owned paradigm of Medicine, that is increasingly impeding quality of our healthcare.

Even if one accepts an unsupported assumption that Medicare should somehow be designed to provide a similar "type of insurance" as that of working Americans, with increasingly fewer younger Americans receiving employer sponsored insurance, perhaps Medicare might be better modeled on Medicaid, which covers 20% of younger Americans. Of course, a single payer model that pools the care costs of all Americans would most effectively equalize "types of insurance" as well as improve the quality of our profitized, bloated, and non-coordinated health "system."

Who Can Access MA Outcome Data?
Brant Mittler MD, JD | Private practice of medicine and health care law
Dr. Wilensky's comparisons of MA plans vs. traditional Medicare FFS practices do not inform readers that claims data for MA practice is largely proprietary and hidden from the public. The insurance company she serves on the board of has a separate data group that owns and profits from these data. What does it cost to access Optum MA claims data and who can get access? These data reflect care paid for by taxpayers and should be open and accessible to outside independent reviewers so that appropriate comparisons can be made about actual patient outcomes of MA vs FFS Medicare patients. Most such studies published to date have been carefully controlled by the MA industry. Virtually all of the analyses of quality of care and other clinical studies in Medicare have been done in the FFS patient population.

My views are informed by having sued MA plans several times for mismanaged managed care resulting in alleged wrongful death and having access to legal discovery not available to the public even though the public pay for these programs.

The privatization of Medicare for shareholder profit will result in Medicare patient outcomes being trade secrets. There is a big need for MA transparency and accountability.

See also the 2018 JAMA Viewpoint "Time to Release Medicare Advantage Claims Data" (1).


1. Brennan N, Ornstein C, Frakt AB. Time to Release Medicare Advantage Claims Data. JAMA. 2018;319(10):975–976. doi:10.1001/jama.2017.21519

CONFLICT OF INTEREST: As an attorney, I have sued Medicare Advantage plans for wrongful deaths of beneficiaries.
Be Fair to Medicare - Bipartisan Failure for Both Original Medicare and Medicare Advantage
William Schiffbauer, J.D., Ll.M. | Schiffbauer Law Office
Recent letters from Congress to CMS have been hailed as "historic, bipartisan support" for Medicare Advantage. House and Senate Member signatories have been labeled as Medicare Advantage "Protectors". However, the letters ignore the 56% of Medicare beneficiaries enrolled in Original Medicare and the original purpose of Medicare Advantage to compete with Original Medicare on a level playing field, and protect overpayments that subsidize more benefits and higher sales commissions to agents. Both political parties have contributed.

Democrats have forgotten Original Medicare. Over half of today's Medicare beneficiaries are enrolled in Original Medicare and are satisfied. Original Medicare
enrollees comprise a large majority - over 50% - in each of forty-seven (47) states. These enrollees are ignored in favor of overpaying Medicare Advantage plans. Instead of a level playing field Medicare Advantage has been given a financial advantage. Originally, the Medicare Advantage program had been expected to reduce Medicare spending and payments were set at 95 percent of Original Medicare. The government now overpays Medicare Advantage plans - over $106 billion between 2010 and 2019 (Health Affairs, 2021). The excess government payments to Medicare Advantage plans are used to provide extra benefits that Original Medicare beneficiaries do not have. Originally these extra benefits were to be paid for out of the managed care savings alone. Original Medicare beneficiaries must pay for extra benefits out of their own pocket.

Republicans have forgotten the idea of "competition." Medicare Advantage was intended to compete on a level playing field with Original Medicare. Using managed care Medicare Advantage would improve health and lower costs and add some extra benefits to be a better value when compared to Original Medicare. Market-based efficiency and competition are traded away for private plan "largesse." Total Medicare payments to Medicare Advantage (including rebates for extra benefits) are estimated at 104 percent of Original Medicare spending. This amounts to hundreds of billions in extra spending above Original Medicare. The extra spending is "government excess" at the expense of taxpayers and Original Medicare enrollees. The excess payments to Medicare Advantage plans are used to provide extra benefits that Original Medicare beneficiaries do not have. Originally these extra benefits were to be paid for out of the managed care savings alone.

Who Really Has the Advantage?
Shawn Baca, MD, FACR | Private Practice
As a rheumatologist I have patients who have very serious illnesses that require expensive medications. Patients who have changed to Medicare Advantage plans sometimes by coercion of previous employers or unions are often shocked at their new out-of-pocket expenses. Many of them have had to forego therapy because they simply can't pay endless copays or wait for endless prior authorizations. They often get stuck because they can not change back to traditional Medicare, as their premiums to purchase to a secondary insurance are much more expensive than if they stayed in the first place. Physician salaries are only approximately 7 percent of the entire US health budget. Physicians have not had an increase in Medicare reimbursement since 1998 despite a large increase in practice overhead and are quitting in droves. We need to have a serious talk about the other bloated 93 percent. This includes high drug and especially middleman costs, high and always increasing administrative costs, and bloated CEO salaries. The system is broken. Adding one more middleman to take "advantage" of the chaos only magnifies the dysfunction.
MA Plan Manipulation of Risk Scores
Ronald Hirsch | Physician Advisor, Advisory Board American College of Physician Advisors
Not since the beginning of the COVID-19 pandemic have I laughed as hard as I did when I read the statement that "most of the debate has centered around the risk adjustment system used by the CMS and whether it may be exploited so that MA plans can offer extra benefits to attract beneficiaries." Used the money for beneficiary benefits? What is the author thinking?? It's all about profits, and the billions of dollars the plans make by depriving patients of necessary care.