Medicare Advantage Growth Shows No Significant Impact on Hospital Financial Margins

Medicare Advantage (MA) enrollment has grown significantly, now covering over half of Medicare beneficiaries. While MA offers benefits like flexible coverage and prescription drug plans, concerns persist about its financial impact on hospitals, especially those in rural areas.

Hospital groups have argued that MA plans pay lower rates and impose burdensome prior authorization policies, leading some systems to drop MA contracts. However, a comprehensive analysis by MedPAC examined hospital cost reports from 2013 to 2023 in relation to MA penetration by county.

The findings indicate that higher MA enrollment correlates with small decreases in both hospital revenue and costs, resulting in no statistically significant effect on hospital profit margins overall. This trend holds even for critical access hospitals and integrated systems contracting with MA plans. MedPAC highlighted that these associations do not prove causation and acknowledged other influencing factors may exist.

Comments from the Better Medicare Alliance emphasize that MA is not driving hospital financial challenges as purported by some groups. The study provides nuanced insight into the interplay between privatized Medicare plans and hospital financial stability amid ongoing debates about MA's role in healthcare spending and access.