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Enrollment Growth and Favorable Selection in Medicare Advantage

In a Medicare theme issue of Health Affairs, authors describe the growth in enrollment in Medicare Advantage (MA) and how favorable selection has resulted in overpayments to MA plans.

“Switching from fee-for-service Medicare to MA more than tripled between 2006 and 2022, whereas switching from MA to fee-for-service Medicare decreased, with the change rates accelerating since 2019,” the authors of the first article write. “The share of switchers among all new MA enrollees rose from 61 percent in 2011 to 80 percent in 2022. Black, dual-eligible, and disabled beneficiaries had higher odds of switching in both directions, whereas younger and healthier beneficiaries had higher odds of switching from fee-for-service Medicare to MA but lower odds of switching from MA to fee-for-service Medicare. Two-thirds of annual switching between MA and fee-for-service Medicare in 2022 occurred in January, likely reflecting the open enrollment period.”

In a study of unobserved favorable selection, benchmark setting, and payments to MA plans in the 2010–2020 period, investigators use national data to examine possible overpayments: “We found that unobserved favorable selection in MA led to underpayment to counties with lower MA penetration and overpayment to counties with higher MA penetration. Because the distribution of MA beneficiaries has shifted over time toward counties that were overpaid, we estimate that plans were overpaid by an average of $9.3 billion per year between 2017 and 2020. Changes to risk adjustment in benchmark setting could likely mitigate the impact of favorable selection in MA.”

Source: Health Affairs