Medicare Advantage Penetration and Hospital Costs Before and After the Affordable Care Act

Research has suggested that growth in the Medicare Advantage (MA) program indirectly benefits the entire 65+-year-old population by reducing overall expenditures and creating spillover effects of patient care practices. Medicare programs and innovations initiated by the Affordable Care Act (ACA) have encouraged practices to adopt models applying to all patient populations, which may influence the continued benefits of MA program growth.

This study investigated the relationship between MA program growth and inpatient hospital costs and utilization before and after the ACA.

Primary data sources were 2005-2014 Health Care Cost and Utilization Project hospital data and 2004-2013 Centers for Medicare & Medicaid Services enrollment data. County-year-level regression analysis with fixed effects examined the relationship between Medicare managed care penetration and hospital cost per enrollee. We decomposed results into changes in utilization, severity, and severity-adjusted inpatient resource use. Analyses were stratified by whether the admission was urgent or nonurgent.

A 10% increase in MA penetration was associated with a 3-percentage point decrease in inpatient cost per Medicare enrollee before the ACA. This effect was more prominent in nonurgent admissions and diminished after the ACA.

Results suggest that MA enrollment growth is associated with diminished spillover reductions in hospital admission costs after the ACA. We did not observe a strong relationship between MA enrollment and inpatient days per enrollee. Future research should examine whether spillover effects still are observed in outpatient settings.