How do Medicare Advantage beneficiary payments vary with tenure?

To compare how premiums and expected out-of-pocket medical costs (OOPC) vary with the length of time Medicare Advantage (MA) beneficiaries have been enrolled in their plans.

Descriptive and fixed effects regression analyses.

Using linked administrative enrollment and plan data, we compared the costs of the MA plans that beneficiaries chose with the costs of other plans available to them. We show predicted values adjusted for age, gender, race/ethnicity, disability, individual health risk, presence of mental health diagnoses, health plan quality, relative size of the plan's provider network, and the number of years continuously enrolled in the same plan. To further address the possibility of bias, we included county-level fixed effects and compared results to a beneficiary-level fixed effects model.

We found average spending on premiums and OOPC in enrolled plans exceeded such costs in the lowest-cost plan by $697 in 2013. Beneficiaries who remained in their plans for 6 or more years were most at risk of spending these higher amounts, paying $786 more than they would have spent in the lowest-cost plan compared with $552 for beneficiaries in their first year of enrollment. For each year a beneficiary remained in their same plan, their additional spending in excess of the minimum cost choice increased by roughly $50.

MA beneficiaries could reduce their exposure to healthcare spending by switching to plans with lower premiums, although there may well be rational reasons for paying costs in excess of those of the lowest-cost plan.