Medicare Advantage Contract Terminations Worsen Racial Health Disparities

Medicare Advantage contract terminations may exacerbate racial health disparities, as contracts that were terminated between 2011 and 2020 served higher rates of Black beneficiaries, a study published in JAMA Health Forum found.

CMS contracts with private payers annually to provide Medicare services through Medicare Advantage plans. The payers can choose to terminate the contract, or CMS can terminate the contract if the plan consistently performs poorly.

These terminations may impact care for beneficiaries and cause them to switch to traditional Medicare or another Medicare Advantage plan with different benefits, networks, and out-of-pocket expenses.

Researchers used CMS plan crosswalk data to identify Medicare Advantage contract terminations between 2011 and 2020. They also used publicly reported star ratings, plan benefit data, and the Medicare Master Beneficiary Summary file to determine plan and beneficiary characteristics.

The sample included 935 Medicare Advantage contracts offered for at least one year during the study period, 170 (18.2 percent) of which were terminated. The contract terminations impacted almost 770,000 Medicare Advantage beneficiaries (2.4 percent).

Terminated contracts were more likely to be lower quality and had an average star rating of 3.1, while contracts that were not terminated had an average star rating of 3.6. However, terminated contracts were also more likely to have zero-dollar premiums than non-terminated contracts (20 percent versus 13.2 percent).

Contracts that were terminated enrolled a higher share of Black beneficiaries, the study found. An average of 21.9 percent of beneficiaries in terminated contracts were Black, compared to 14.3 percent of beneficiaries in contracts that were not terminated.

Terminated contracts served significantly more Black beneficiaries every year except for 2020.

While terminating lower-quality contracts could benefit some individuals, terminations can also cause care disruptions for beneficiaries switching to traditional Medicare or those enrolling in a new Medicare Advantage plan that may have a limited practitioner network.

“Given the potential disproportionate effect of terminations on Black beneficiaries, contract terminations may exacerbate disparities in access and continuity of care,” researchers wrote.

Policymakers must recognize the potential repercussions of Medicare Advantage contract terminations as enrollment in the private program continues to grow, particularly among racial minority groups.

Almost half of Medicare beneficiaries (48 percent) are enrolled in Medicare Advantage plans in 2022, or 28.4 million beneficiaries. The Medicare Advantage population has grown significantly within the last ten years, primarily due to increased enrollment from Black, Hispanic, and low-income individuals.

Medicare Advantage also tends to attract beneficiaries because of the program’s enhanced benefits, such as vision and dental coverage.