After a Medicare Advantage Boom, Are We in a Bust?

In September 2023, we published a post on how payors using AI to process Medicare Advantage (MA) claims has been driving a rise in denials. This post covers some of the latest trends in Medicare Advantage plans, including hospitals, health systems, and physician practices dropping MA plans, while some payors are selling off their MA plans.

Among available health coverage options for seniors, Medicare Advantage (MA) plans have gained popularity based on aggressive marketing by commercial payors touting an unbeatable combination of benefits and savings. According to an analysis by KFF, the average Medicare beneficiary had access to 43 Medicare Advantage plans in 2024, the same as in 2023, but more than double the number of plans offered in 2018. However, recent data trends paint a different picture–one where providers and patients are left frustrated.

Higher Denial Rates Persist

One of the most frustrating concerns for both patients and providers is the higher denial rates associated with MA plans. This is nothing new. XiFin’s analysis of its customers’ 2021 claims shows that Medicare Advantage denials were 43% higher than traditional Medicare denials. These higher denials largely stem from discrepancies and the misapplication of Medicare coverage rules, leaving providers and patients struggling to navigate the complex appeals landscape.

Providers Dropping Medicare Advantage Plans

Evidence of these challenges can be seen in the increasing number of providers dropping Medicare Advantage plans altogether. Hospitals, in particular, have been at the forefront of this exodus, citing higher claim denial rates and excessive administrative burdens as primary reasons for severing ties with private Medicare plans.
In San Diego, for example, Scripps Health began notifying patients in September 2023 that it is terminating Medicare Advantage contracts for its integrated medical groups, which will affect more than 32,000 seniors in the region. The medical groups, Scripps Clinic and Scripps Coastal, employ more than 1,000 physicians, including advanced practitioners. As covered in the Becker’s Hospital CFO Report in December 2023, from prestigious institutions like the Mayo Clinic to regional health systems, the message is clear: the status quo of Medicare Advantage is unsustainable for providers.

Regulatory and Legislative Scrutiny

As health providers terminate contracts for commercial insurers’ MA plans, seniors face tough decisions on how and where to get medical care. Even regulators and legislators are taking note of the issues plaguing Medicare Advantage plans. Recent regulations from the Centers for Medicare and Medicaid Services (CMS) underscore the need for plans to prioritize individual circumstances over automated algorithms in making medical necessity determinations. Additionally, senators have issued warnings to major insurers, emphasizing the importance of adherence to Medicare coverage rules.

The impact on patients cannot be understated. What was once marketed as a seamless transition to enhanced coverage has devolved into a quagmire of limited provider options and uncertain access to care. The promises of savings and superior services touted by commercial payors have given way to a reality where patients are left stranded as providers increasingly opt out of Medicare Advantage contracts.

The Economics of MA Plans are Impacting Payors

As providers pivot away from Medicare Advantage plans, some payors are reassessing their involvement in this increasingly turbulent market. At the end of January 2024, The Cigna Group, a smaller player at 5% market share in the Medicare Advantage marketplace, announced that it will sell its Medicare business, including its Medicare Advantage insurance portfolio to Health Care Service Corp. (HCSC), for about $3.7 billion.

According to a recent article in msn.com, Cigna CEO David Cordani said in a statement that the company “still sees Medicare as an attractive market, but that business required a focus and resources that were “disproportionate to their size” within the company’s portfolio.” This move underscores the shifting dynamics within the industry, with companies reallocating resources in response to mounting challenges.

United Healthcare Group and Humana own 47% of the Medicare Advantage marketplace. In comparison, Blue Cross Blue Shield supports approximately 23% of the market marketplace, and CVS Health supports 20%. Entering 2024, three new firms that were not in the market in 2023 now offer Medicare Advantage plans, while 12 organizations withdrew their offerings largely due to low enrollment.

The Justice Department (DOJ) also has its eye on Medicare Advantage plans. Cigna Group and Martin’s Point Health Care were the first settlements noted by the DOJ. Cigna reached an agreement in October 2023 to pay $172 million to settle whistleblower allegations it submitted false Medicare Advantage diagnostic codes to boost reimbursement. Martin’s Point Health Care agreed to pay $22.5 million to settle False Claims Act violations in August 2023.

Looking to the Future of Healthcare for Seniors

Private Medicare programs are clearly facing upheaval. Demographic shifts and evolving healthcare needs underscore the urgent need for innovative solutions that prioritize patient care and provider collaboration. Combined with the dwindling of funds held in the Medicare Trust, the relationship between public and private Medicare options needs to be reimagined.

With patients and providers alike grappling with the fallout from high denial rates and administrative burdens, it is imperative that stakeholders—from regulators to payors—work collaboratively to address the challenges facing commercial Medicare Advantage programs. The goal must be to prioritize patient well-being and ensure equitable access to quality care for all Medicare beneficiaries. Only then can we truly fulfill the promise of comprehensive and compassionate healthcare coverage for our nation’s seniors.

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