Medicare Advantage has seen tremendous growth over the past two decades, with enrollment rising from 5.3 million in 2004 to over 28 million beneficiaries today. This represents 42% of the total Medicare population enrolled in Medicare Advantage Plans. But is the future of Medicare Advantage at risk due to potential policy changes, overpayments issues, and other factors that could diminish its role in Medicare?

While the Medicare Advantage program faces challenges, it retains strong support in Congress and continues to be popular with seniors. However, upcoming changes will impact plan payments and enrollment incentives that play a key role in determining Medicare Advantage’s outlook in 2023 and beyond.

What is Medicare Advantage?

First, a quick overview of what comprises Medicare Advantage:

  • Medicare Advantage Plans are offered by private insurers approved by Medicare
  • Plans must cover all Medicare Part A and Part B benefits
  • Many plans include prescription drug coverage
  • They limit out-of-pocket spending and offer extra benefits
  • Enrollees receive care through plan provider networks

Insurers are paid a capitated monthly rate per member that covers projected costs. These payments are risk adjusted based on health conditions.

Concerns Over CMSRADV Medicare Audits

Medicare uses a process called risk adjustment data validation (RADV) to audit Medicare Advantage Plans and confirm the accuracy of health status reporting used to set risk scores and plan payments.

However, RADV audits have resulted in overpayment findings to Medicare Advantage Plans totaling billions of dollars. The industry argues these payment recovery efforts are flawed.

Key issues raised regarding RADV audits include:

  • CMS RADV audits extrapolate error rates from small sample sizes
  • Plans dispute audit findings of coding pattern differences from Original Medicare
  • Medicare Advantage Plans argue CMS lacks authority to recoup alleged overpayments
  • The industry wants RADV methodology changed and limitations placed on extrapolated recovery

Finalization of the RADV audit rules has been delayed for over a decade. The Biden administration is expected to restart the rulemaking process. This could expose Medicare Advantage Plans to expanded payment recoupment, reducing insurer incentives.

Proposed Changes to Risk Adjustment Model

Medicare also proposes changes to the risk adjustment model used to pay Medicare Advantage Plans based on enrollee health conditions starting in 2024.

The proposed changes:

  • Move to ICD-10 diagnosis coding from ICD-9
  • Incorporate high cost conditions data
  • Exclude low cost conditions that don’t predict costs
  • Expand the Hierarchical Conditions Categories used
  • Update prescription drug data factors

These changes aim to improve risk score accuracy and address Medicare Advantage favorability in the current model. The industry indicates it could decrease risk scores and lower payments.

Rising Medical Costs and Expenses

In addition to potential payment methodology changes, Medicare Advantage Plans are impacted by overall medical cost inflation.

Key medical cost trends include:

  • Rising prices for medical services, drugs, equipment
  • Expensive new treatments and technology
  • Chronic condition prevalence in senior population
  • Intensive needs among dual eligible members
  • Workforce shortages driving up provider pay

If medical expenses rise faster than Medicare Advantage benchmark payment rates, it squeezes plan profit margins.

Impact of Rising Medicare Advantage Premiums

To compensate for the above factors and maintain margins, Medicare Advantage Plans have been raising premiums.

  • The average monthly Medicare Advantage premium for 2023 is $19, up from $12 in 2021.
  • Premiums for the most popular plans rose 8% between 2022 and 2023.
  • Higher premiums could deter some lower-income seniors from enrolling.
  • Enrollment shifts back to Original Medicare can affect risk pools.

If premiums rise too fast, it could impact Medicare Advantage membership and revenue.

Is Enrollment Growth at Risk?

The above issues raise the question of whether Medicare Advantage enrollment growth is at risk of slowing in the coming years.

Key factors impacting enrollment outlook:

  • Rising premiums reducing affordability
  • Lower plan bonuses and incentives to attract members
  • Increased marketing by Original Medicare Plans
  • Potential for lower consumer satisfaction long-term
  • Ongoing enrollment shifts during Annual Enrollment Period

However, many analysts expect Medicare Advantage to continue gaining market share:

-Enrollment is projected to rise 8% in 2023 to 29 million members

  • Increased value-based plan designs attract members
  • Shift from HMOs to PPOs expands choice and networks
  • 90% of Medicare beneficiaries have access to Medicare Advantage Plans
  • Aging population needing coordinated care

While Medicare Advantage may face challenges, it retains advantages that should enable continued enrollment growth overall.

Is Medicare Advantage At Risk or Here to Stay?

In conclusion, is Medicare Advantage at risk of declines or will it remain a vital part of the Medicare program? Key takeaways:

  • Proposed payment methodology changes could reduce plan favorability
  • Ongoing RADV audit and overpayment issues generate disputes
  • Rising medical costs squeeze profit margins
  • Higher premiums could deter enrollment if increases continue
  • Original Medicare competition remains strong


  • Medicare Advantage retains strong support in Congress
  • The senior population needing coordinated care is growing
  • Enrollment still expected to expand over the next decade
  • Plans are popular for capped out-of-pocket costs
  • Insurers are invested in program success

While the Medicare Advantage landscape faces challenges in 2023, the program overall appears well positioned to remain a pillar of Medicare for years to come. But new policies, enrollment shifts, and cost pressures will continue to shape Medicare Advantage’s outlook and risk profile.

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How does Traditional Medicare differ from Medicare Advantage Plans?

Traditional Medicare is the Original Medicare program administered directly by the Centers for Medicare and Medicaid Services (CMS). Medicare Advantage Plans are offered by private insurance companies and provide Medicare Part A and Part B coverage, sometimes with additional benefits. With Traditional Medicare, beneficiaries can see any doctor or hospital that accepts Medicare nationwide. Medicare Advantage Plans have provider networks and may require referrals or pre-authorization for services.

What changes is CMS making to Medicare Advantage Plan ratings for 2023?

For 2023, CMS is making adjustments to the Star Ratings methodology for Medicare Advantage Plans. This includes limiting the practice of “extrapolating” Risk Adjustment Data Validation (RADV) audit findings, as well as technical changes to cut points and weightings. These changes could lead to lower Star Ratings and affect payment rates and rebates for Medicare Advantage organizations.

How does Medicare cover prescription drugs?

The Medicare Prescription Drug Benefit, also called Medicare Part D, helps pay for prescription drugs for people with Medicare. This coverage is provided through private Medicare drug plans contracting with Medicare. Beneficiaries can choose to enroll in either a stand-alone Part D Plan or a Medicare Advantage Plan that includes drug coverage.

What benefits do Special Needs Plans provide?

Special Needs Plans (SNPs) are Medicare Advantage Plans that limit membership to people with specific diseases, certain eligibility criteria, or who live in certain institutions. SNPs tailor their benefits, provider networks, and drug formularies to best meet the specialized needs of the groups they serve.

How much does Medicare spend on beneficiaries annually?

According to the 2022 Annual Report from the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Medicare spent an average of $13,076 per beneficiary in 2021. This includes spending under both Medicare Part A and Part B. Total Medicare spending was $851 billion in 2021 for approximately 63 million beneficiaries enrolled in Medicare Parts A and B.

What changes is Medicare making for 2024 contracts?

CMS issued a Final Rule outlining updates for Medicare Advantage and Part D Plans for contract year 2024. Changes include revising risk adjustment models, requiring special needs plan reporting on health equity, and allowing wider use of telehealth for mental health services. The goal is improving quality of care and health outcomes for Medicare beneficiaries.

What does Medicare cover for patients with chronic kidney disease?

For patients with chronic kidney disease (CKD), Medicare Part B covers dialysis treatments and kidney disease education services. Under Traditional Medicare, patients choose where to get dialysis services. Medicare Advantage Plans must cover the same services but can specify dialysis providers. CKD patients with Medicare can also enroll in Medicare Part D Plans for help paying prescription drug costs.

What is the Medicare Modernization Act of 2003?

The Medicare Modernization Act of 2003 made major changes to Medicare, including adding prescription drug coverage under Medicare Part D and expanding Medicare Advantage Plan options. This law also introduced competition between private Medicare Plans to try to encourage cost efficiency. Provisions were aimed at modernizing the Medicare program.

How are costs and premiums for Medicare Advantage Plans determined?

Medicare Advantage Plans submit annual bids to CMS indicating the estimated costs of providing Medicare Part A and B services. CMS compares plan bids to Fee-for-Service Medicare costs to derive county benchmarks that set maximum payments to plans. Plans with bids lower than benchmarks may include extra benefits. Monthly premium costs are also determined based on plan bids compared to benchmarks.

How are beneficiaries with both Medicare Parts A and B affected by potential changes?

A majority of Medicare beneficiaries are enrolled in both Part A and Part B health plans. Proposed updates to payment rates, supplemental benefits allowed, and Stars methodology for Medicare Advantage Plans in 2023 could affect costs, premiums, and benefits for these enrollees. Those remaining in Traditional Medicare may also be impacted if payment rate changes affect provider participation.