Medicare Advantage’s popularity is associated with lower total Medicare spending, a new report from Elevance Health finds.
Medicare spending was $431 billion less from 2010 to 2020 than the Congressional Budget Office predicted, and the overestimations were due to spending per enrollee. More than 32 million people, or 54% of the eligible Medicare population, are enrolled in an MA plan.
This trend is most noticeable geographically in midwestern and southern counties, researchers explained, but a weaker association is evident in northwest and western counties.
“This analysis is the first study to suggest that one key factor that likely contributed to this slowdown in total Medicare spending is the substantial growth in MA enrollment in the past decade,” the researchers said.
Other factors that could be leading to decreased Medicare spending are the shift to preventive and value-based care and other federal and state policies.
Once the analysis factored in risk adjustment coding intensity as estimated by the Medicare Payment Advisory Commission, the association remained and savings could have totaled $116 billion.
There are a few theories as to why increased MA penetration leads to lower Medicare spending.
“One of these is spillover effect; that is, as MA enrollment increases, providers adapt their behavior to align with MA plan incentives for quality and efficiency—such as chronic condition management and reduced utilization of costly services like advanced imaging—for all of their Medicare patients, whether in FFS or MA,” the authors wrote.
Some regions may also be more susceptible to saving opportunities, like the Midwest and the South.
Elevance says the study also shows MA enrollee spending was $500 less than per person than traditional Medicare enrollees.