Medicare Advantage Plan Payment Cuts Did Not Impact Enrollment Growth

Medicare Advantage plan payment cuts under the Affordable Care Act (ACA) did not lead to enrollment reductions, suggesting that further payment reform could minimize spending without hurting access to care, a study published in JAMA Health Forum found.

Past research has indicated that higher payments to Medicare Advantage plans could help increase enrollment by resulting in better benefits than fee-for-service Medicare offers. Meanwhile, cutting Medicare Advantage plan payments could limit the program’s ability to offer supplemental benefits, harming beneficiary access to certain services.

Medicare Advantage payment reforms included in the ACA aimed to reduce federal spending by revising the methodology for calculating county benchmarks. Researchers used CMS enrollment, benchmark, and payment data from 2008 to 2019 to determine the association between plan payment cuts under the ACA and Medicare Advantage enrollment.

The study focused on 2017 benchmark changes, as that was the year ACA benchmark calculations fully took effect.

The final sample included 3,138 counties with a mean 2017 benchmark of $827.37 per beneficiary per month. Benchmark cuts under the ACA ranged from 0 percent to 42.9 percent.

Benchmark cuts above the 75th percentile were considered larger cuts. These benchmark cuts were not correlated with lower growth in Medicare Advantage enrollment, the study found. There was a statistically insignificant 0.02 percentage point greater increase in Medicare Advantage enrollment for counties with larger cuts compared to those with smaller cuts.

Counties with larger benchmark cuts saw a relative reduction in Medicare Advantage plan payments. Between 2008 and 2011, counties with large benchmark cuts had average payments that were $112.42 per beneficiary per month higher than other counties. Following the benchmark changes from 2017 to 2019, the difference decreased to $36.88 per beneficiary per month.

Although counties with larger benchmark cuts saw relative declines in payments compared to counties with smaller cuts, these counties saw similar enrollment growth.

“This study can inform ongoing policy debates regarding the growth of MA, concerns about excess payments to MA plans, and proposed Medicare reforms, including further changes to MA benchmarks,” researchers wrote.

The findings suggest that the Medicare Advantage program could undergo additional payment cuts without shrinking the market.

Additionally, the results show that ACA benchmark cuts did not impact supplemental benefit offerings that attract beneficiaries to Medicare Advantage. However, researchers noted the possibility that the payment cuts reduced the value of plan offerings, but the change did not affect enrollment.

Although the findings differ from past research, other studies focused on payment increases, which yielded enrollment increases, while this study assessed payment cuts.

“It is possible that insurers respond asymmetrically to payment cuts and payment increases, passing on the benefits of payment increases to consumers to attract enrollment but shielding existing benefits from the payment cuts,” the study stated.

Stakeholders have been calling for additional Medicare Advantage payment reform, as plans are expected to receive over $75 billion in overpayments in 2023.

Even though the ACA payment reforms did not affect enrollment, any future payment reductions could have different impacts depending on which aspect of the payment calculation is modified, how large the cut is, what counties are targeted, and how it is implemented.