Impact of Medicare Advantage Enrollment on Spending

New research from the Elevance Health Public Policy Institute indicates that increased enrollment in Medicare Advantage (MA) may correlate with reduced overall spending in the Medicare program. Over recent decades, Medicare Advantage enrollment has surged, rising from roughly 11 million enrollees (25% of all Medicare beneficiaries) in 2010 to 32 million (54% of beneficiaries) by 2024.

The study, published in INQUIRY: The Journal of Health Care Organization, Provision, and Financing, examines county-level Medicare spending and enrollment data collected from the Centers for Medicare & Medicaid Services (CMS), covering 2012 to 2021. It reveals that a 10 percentage-point increase in Medicare Advantage participation is associated with a 1.5% reduction in total Medicare spending per capita, amounting to $194 in savings. When adjustments were made for risk scores, based on the Medicare Payment Advisory Commission's estimates regarding coding intensity, the reduction was 1.1% per capita, or $146.

The analysis estimates that from 2012 to 2021, the rise in MA enrollment potentially saved $111 billion compared to a scenario where enrollment levels remained consistent with 2011. With coding adjustments, the figure stands at $83 billion. The report suggests that these cost savings may result from adjustments in provider behaviors to align with MA plans' emphasis on quality and efficiency, particularly improving chronic condition management and reducing the utilization of costly services, thereby impacting care for all Medicare beneficiaries.