Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - Medicare Advantage (Part C) 101

3. Compliance Chatter 📢 - D-SNP proposed rule for 2025.

4. Sponsor Snapshot 🚀 - brought to you by Modivcare.

5. Data Visual of the week 📊 - Data Visual highlighting MA Penetration over time.

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

A+B=C? : Medicare Advantage (Part C) 101

Last year, we looked at Parts A and B of original Medicare including its history, administration, eligibility, coverage, enrollment statistics, and how it is funded. 

This week’s deep dive is going to continue through the Medicare alphabet by looking at Part C.

Part C is more commonly known as a Medicare Advantage (MA) Plan. Medicare Advantage (MA) plans are offered by private companies who have been approved by Medicare. 

MA plans provide a beneficiary’s Part A and Part B coverage, instead of original Medicare, and may offer additional benefits.

Medicare will pay a fixed amount every month to the companies offering MA plans. In addition, companies can earn additional amounts from Medicare through risk adjustment and bonus payments. These companies must follow rules set by Medicare and meet minimum loss ratios and quality standards.

Each MA plan can charge different out-of-pocket costs and have different rules for how beneficiaries receive services – like requiring referrals or pre-authorizations. These rules can change each year along with benefits and coverage amounts. 

Companies can make plans available in an entire state or only in certain counties. They can also offer multiple plans in an area – with different benefits & different beneficiary costs. 

Let’s take a few steps back from this current MA plan overview and dive into the history of Part C.

History

The history of Part C begins shortly after the inception of the original Medicare program in 1965. 

From the early 1970s to the late 1990s, Medicare contracted with some health maintenance organizations (HMOs) to provide Part A and Part B coverage for beneficiaries. HMOs were paid a monthly fee per member and could elect a risk sharing or non-risk sharing contract option. 

Legislation changes during these years focused on refining risk sharing payment models, increasing Medicare cost savings, and reducing overpayment rates to HMOs. Starting in the early 1980s, plans were required to use any overpayments from Medicare to fund additional health benefits – a feature that remains present and popular in today’s plans!

“Part C” was officially created as part of the Balanced Budget Act of 1997. The Act created an annual enrollment period, further refined risk sharing payment models, and introduced new types of private plans:

• preferred-provider organizations (PPOs)

• provider-sponsored organizations (PSOs)

• private fee-for-service (PFFS) plans

• and high deductible health plans with medical savings accounts (MSAs)

In 2003, Part C was renamed Medicare Advantage under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This legislation also created the bid system utilized today that carriers use to submit plans to the Centers for Medicare & Medicaid Services (CMS) for review and approval each contract year. Finally, this act introduced two new types of plans:

• regional preferred provider organizations (RPPOs)

• and special needs plans (SNPs)

Benefits & Costs: Original Medicare vs Medicare Advantage

A comparison of beneficiary benefits and costs associated with original Medicare and MA plans is detailed in the table below. 

Generally, a beneficiary will pay higher monthly Medicare premiums but typically pay less for health services with original Medicare; they’ll pay lower (or no!) monthly MA premiums but could pay more for health services depending on copays and coinsurance amounts for their MA plan.

Types of Plans

Next, let’s look at the different types of Part C/Medicare Advantage plans that carriers may offer. 

 Health Maintenance Organizations (HMOs)

HMO plans have a network of providers and hospitals available to beneficiaries. There may be coverage for services out-of-network, although at an increased copay or coinsurance amount. Beneficiaries are required to coordinate care through their primary care doctor if specialist care is required.

Preferred-Provider Organizations (PPOs)

PPO plans have a network of providers and hospitals available to beneficiaries. There may be coverage for services out-of-network, although at an increased copay or coinsurance amount. Specialized care can be sought without a referral from a primary care doctor.

Medicare Medical Savings Account Plans (MSAs)

This type of plan provides coverage after a high annual deductible is met. It also includes a special type of savings account, funded by the plan, that beneficiaries can use to pay for health care costs.

Private Fee-For-Service Plans (PFFS)

This type of plan sets how much it will pay providers and hospitals, and how much beneficiaries must pay for care. Beneficiaries can receive care from any provider or hospital that has accepted the plan’s payment terms. PFFS plans may also allow “balance billing” where the beneficiary may be responsible for an additional charge if the provider’s fee is higher than the payment from Medicare.

Special Needs Plans (SNPs)

Special Needs Plans provide tailored benefits and services to people with specific diseases, certain health care needs, or who also have Medicaid coverage.

Plan Star Ratings

CMS publishes MA Star Ratings each year to measure the quality of health and drug services received by consumers enrolled in MA plans. 

For Individuals –

The Star Ratings system helps beneficiaries compare the quality of Medicare health and drug plans being offered so they are informed and empowered to make the best health care decisions for them.

For Companies –

Depending on their overall star rating, MA organizations may receive bonus payments and rebates. The higher the rating, the greater possible bonus payment or rebate.

On the other hand, regulations also give CMS the option to terminate contracts with plans that fail to achieve at least 3 stars for three consecutive years.

Find out more about Star Ratings here (link).

Enrollment Statistics

Over the past decade, enrollment in Part C has shown significant growth, from just 19% of the total Medicare beneficiary population in 2007 to 51% of beneficiaries in 2023.  The Congressional Budget Office (CBO) projects that the share of all Medicare beneficiaries enrolled in MA plans will rise to 62 percent by 2033!

(see data visual of the week below for MA penetration over time)

There are several factors that contribute to the popularity of MA plans including:

• Additional benefits included (like prescription drugs, vision, dental) that aren’t part of original Medicare

• Low (or no!) premium

• No underwriting requirements

• Annual enrollment windows to easily change plans

• New and creative supplemental benefits (fitness, meal delivery, caregiver support, telemedicine)

• Heavy marketing by companies and distribution channels

It’s no secret that the MA market is dominated by a few large companies. United Health Group, Humana, and CVS Health comprise over half the market share.

It’s important to note in our overview that MA popularity does vary significantly by state and county. Many counties with high MA penetration rates are centered around relatively large, urban areas whereas counties with low MA plan enrollment tend to be less populated or rural areas. The map below shows MA penetration rates out of total eligible beneficiaries by state.

That completes our first look into Part C!  Now you’re up to speed on the basics of MA plans. Keep an eye out for future deep dives into the MA world.

If you can’t wait for the next installment, feel free to check out these prior deep dives related to MA plans!

Sources:

• medicare.gov

• cms.gov

• https://www.medicarerights.org/pdf/medicare-advantage-101-legislative-milestones.pdf

DATA VISUAL of the Week 📊

This week’s data visual comes from kff.org! It shows MA penetration over time.

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

• Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)

• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)