Will Medicare Advantage payment reforms impact plan rebates and enrollment?

Area of Science:

• Health Economics
• Public Health Policy
• Medicare Policy

Background:

• Medicare Advantage (MA) plans offer benefits beyond traditional Medicare, often funded by rebates.
• Affordable Care Act (ACA) payment reforms aim to reduce Medicare spending.

Purpose of the Study:

• To analyze the link between MA plan rebates and enrollment numbers.
• To simulate the impact of ACA payment reforms on MA enrollment and beneficiary risk scores.

Main Methods:

• Utilized first-difference regressions on county-level MA payment and enrollment data (2006-2010).
• Analyzed data from the Centers for Medicare & Medicaid Services (CMS).

Main Results:

• A $10 reduction in monthly rebates correlated with a 0.20% decrease in MA penetration and a 7.1% drop in average enrollee risk score.
• These effects were amplified in low-spending counties, with a $10 rebate decrease leading to a 0.64% MA penetration decline and a 10% risk score decrease.
• ACA reforms are projected to reduce rebates in lower-spending counties, potentially causing 1.7-1.9% enrollment decreases, primarily among higher-risk beneficiaries.

Conclusions:

• MA enrollment is sensitive to supplemental benefits funded by rebates.
• ACA reforms targeting MA spending will disproportionately affect beneficiaries in areas where MA plans may struggle to compete with traditional Medicare on price and benefits.