Implications of Default Enrollment in Medicare Advantage for U.S. Medicare

Proposals to default new Medicare beneficiaries into Medicare Advantage plans rather than traditional Medicare could significantly alter enrollment dynamics in the U.S. Medicare program. Currently, individuals electing Medicare Parts A and B are automatically enrolled in traditional Medicare unless they actively choose a Medicare Advantage plan. Under a default enrollment system for Medicare Advantage, beneficiaries would be automatically assigned to a Medicare Advantage plan but retain the option to switch.

This shift aims to increase access to extra benefits like dental, vision, and hearing coverage and potentially better coordinated care compared to traditional Medicare. However, there are concerns that beneficiaries may not fully understand Medicare Advantage tradeoffs such as limited provider networks, prior authorization requirements, and potential cost-sharing complexities. The process of assigning beneficiaries to specific Medicare Advantage plans could disrupt existing patient-provider relationships and lacks a standardized method to account for individual health needs or preferences. The impact on insurers could vary widely; insurers with strong commercial or dual Medicaid-Medicare presence may be favored depending on the assignment criteria, potentially disadvantaging smaller or niche insurers.

Healthcare providers have reported challenges with Medicare Advantage plans related to prior authorization burdens, slower payments, and lower reimbursement rates compared to traditional Medicare, which could be exacerbated by expanded default enrollment. Insurance agents and brokers may also face reduced roles and revenues, as default enrollment would limit beneficiary reliance on their guidance for Medicare Advantage plan selection. Financially, Medicare Advantage plans cost Medicare about 20% more per enrollee than traditional Medicare, amounting to an additional $84 billion in 2025 spending.

Default enrollment into Medicare Advantage is projected by some analyses to increase federal Medicare spending by up to $269 billion over ten years, potentially raising premiums for all beneficiaries. Implementation approaches under consideration include pilot programs via the Center for Medicare and Medicaid Innovation (CMMI), Section 402 demonstration authority, or new legislation. CMMI models offer flexibility and waivers without Congressional approval but require maintaining or reducing overall spending. Section 402 demonstrations must be budget neutral and are subject to additional administrative reviews.

Legislative changes could face resistance due to concerns about Medicare Advantage payment policies, prior authorization practices, and rural coverage disparities. Overall, default enrollment into Medicare Advantage presents complex tradeoffs affecting beneficiaries, insurers, providers, agents, and government budgets within the Medicare ecosystem.