Medicare Advantage Hits 32.8M Enrollees, 54% of Spending

This year, 32.8 million people enrolled in a Medicare Advantage (MA) plan, accounting for $462 billion (54%) of total Medicare spending, according to an analysis by KFF.¹

MA enrollment has been steadily rising for the past 2 decades following the implementation of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, which created stronger financial incentives for plans to participate and renamed private Medicare plans MA.² Consequently, the number of MA enrollees increased from 8 million in 2007 to 32.8 million in 2024.¹

MA enrollment growth is due to various factors, including the availability of zero-premium plans. Dennis Scanlon, PhD, professor of health policy and administration, Pennsylvania State University, explained that beneficiaries often choose MA plans since they can cover extra benefits, like vision and dental.³

Additionally, MA plans are required to limit out-of-pocket spending, making it even more appealing to beneficiaries.¹ However, the Medicare Payment Advisory Commission March 2024 report shows that MA plans receive CMS payments that are 122% of spending for similar beneficiaries enrolled in traditional Medicare, equating to an estimated $83 billion in higher spending.⁴

As MA enrollment increases, policymakers have begun fixating on how effective the current MA payment methodology is at enhancing efficiency, keeping beneficiary costs low, and reducing Medicare spending.¹ To better understand growth trends, researchers analyzed current MA enrollment information by plan type and firm; they also studied how MA enrollment varies by state and county. 

Medicare Advantage enrollment has grown to 32.8 million in 2024, representing 54% of total Medicare spending. | Image Credit: dizain - stock.adobe.com

To conduct their study, the researchers used data from the CMS Medicare Advantage Enrollment, Benefit, and Landscape files for each respective year. Also, they obtained March 2023 and 2024 enrollment data from the Medicare Enrollment Dashboard. They then extracted enrollment data for all years before 2023 from the CMS Chronic Conditions Data Warehouse Master Beneficiary Summary File.

The researchers next calculated the share of eligible Medicare beneficiaries enrolled in MA, meaning those with Parts A and B. The trend analysis began in 2007 since that was the earliest recorded year of data based on March enrollment. Also, enrollment data were only provided for plan-county combinations with at least 11 beneficiaries. Therefore, the analysis excluded about 400,000 individuals in counties that did not meet this threshold. Lastly, the researchers determined Medicare projections for 2025 through 2033 using the June 2024 Congressional Budget Office (CBO) Medicare Baseline.

Consequently, the researchers found that more than half of eligible Medicare beneficiaries (54%) are enrolled in MA in 2024. This equates to 32.8 million of 61.2 million beneficiaries, accounting for $462 billion (54%) of total Medicare spending. Therefore, MA enrollment jumped from 19% in 2007 to 54% in 2024.

More than 6 in 10 MA enrollees (62%) are in plans generally available to all beneficiaries for individual enrollment; compared with 2023, this is an increase of 900,000 enrollees. Conversely, 5.7 million enrollees are in a group plan offered to retirees by an employer or a union. With a group plan, an employer or a union contracts with an insurer, and Medicare pays a fixed amount per enrollee to provide Medicare-covered benefits. The number of group plan enrollees has increased from 1.8 million in 2010 to 5.7 million in 2024.

Additionally, over 6.6 million Medicare beneficiaries are enrolled in special needs plans (SNPs), which restrict enrollment to specific types of beneficiaries with significant or specialized care needs; those eligible for both Medicare and Medicaid also qualify for SNPs. Compared with 2023, SNP enrollment increased by 16% in 2024, accounting for 20% of total MA enrollment. This is partly due to the increasing number of SNP plans available and more dual-eligible beneficiaries able to access these plans; of all SNP enrollees, 88% are in plans for beneficiaries dually enrolled in both Medicaid and Medicare.

Despite the large number of MA beneficiaries, the researchers found enrollment to vary across states; it ranged from 2% in Alaska to 63% in Connecticut, Michigan, and Alabama. Overall, Puerto Rico had the highest MA penetration, with 95% of Medicare beneficiaries enrolled in an MA plan. Additionally, in Rhode Island, Florida, Maine, Hawaii, Connecticut, Alabama, and Michigan, 60% or more of all Medicare beneficiaries are enrolled in MA plans.

MA enrollment also varied more locally, differing widely across counties. More specifically, the researchers found that over one-third (37%) of Medicare beneficiaries live in a county where at least 60% are enrolled in MA plans. They noted that many counties with a high MA penetration are centered around relatively large urban areas.

Conversely, 8% of Medicare beneficiaries live in a county where less than one-third of beneficiaries are enrolled in MA plans. Unlike those with a high MA penetration, the researchers found that less populated, rural counties tended to have relatively low MA enrollment.

These enrollment variations could be explained by numerous factors, like firm-level strategies targeting particular geographic areas, Medicare payment rate variations, and health care use patterns. Other factors include the urbanicity of the county and state, the number and characteristics of those eligible for Medicare, and the historical MA market penetration.

Despite the increasing number of MA enrollees, the average Medicare beneficiary can only choose between 43 MA plans offered by 8 firms. Together, United Healthcare (29%) and Humana (18%) account for almost half (47%) of all MA enrollees nationwide. Blue Cross Blue Shield (BSCS) affiliates account for 14% of enrollment, and 4 other firms (CVS Health, Centene, Cigna, and Kaiser Permanente) account for 23% of enrollment.

Since 2017, the market shares for UnitedHealthcare and CVS Health have increased from 25% to 29% and 8% to 12%, respectively, while Humana (18%) and Cigna (2%) have remained the same. In contrast, Centene, Kaiser Permanente, and BCBS affiliates have experienced a slight decrease in their total share of enrollments. Lastly, small firms, which each account for less than 2% of enrollment, have a smaller market share in 2024 than in 2017 (19% to 16%). Regardless of these shifts, the CBO projected MA enrollment to increase to 64% by 2034.

References

1. Freed M, Biniek JF, Damico A, Neuman T. Medicare Advantage in 2024: enrollment update and key trends. KFF. August 8, 2024. Accessed August 12, 2024. www.kff.org/medicare/issue-brief/medicare-advantage-in-2024-enrollment-update-and-key-trends/

2. Health plans - general information. CMS. 2023. Accessed August 12, 2024. https://www.cms.gov/medicare/enrollment-renewal/health-plans#:~:text=The%20M+C%20program%20in

3. Petrullo J. Dr Dennis Scanlon discusses what to be aware of as Medicare Advantage programs grow. The American Journal of Managed Care^®. February 26, 2023. Accessed August 12, 2024. https://www.ajmc.com/view/dr-dennis-scanlon-discusses-what-to-be-aware-of-as-medicare-advantage-programs-grow

4. The Medicare Advantage program: status report. In: Report to the Congress: Medicare Payment Policy. Medicare Payment Advisory Commission; 2024:357-342. https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_MedPAC_Report_To_Congress_SEC.pdf