Market Concentration and Potential Competition in Medicare Advantage.

Area of Science:

• Health economics
• Health insurance markets
• Market concentration analysis

Background:

• Medicare Advantage (MA) is a private alternative to traditional Medicare, serving a significant portion of beneficiaries.
• MA plans were intended to generate Medicare savings through managed competition among private insurers.
• Effective competition is crucial for achieving cost efficiencies and appropriate premiums in MA.

Purpose of the Study:

• To examine market structure and competition within Medicare Advantage (MA) markets.
• To assess the level of concentration and identify potential competitors in MA.
• To understand the implications of market concentration for Medicare savings.

Main Methods:

• Analysis of Medicare Advantage insurer and enrollment data from 2009–2017.
• Measurement of actual and potential competitors in each U.S. county annually.
• Examination of market concentration trends over time.

Main Results:

• Medicare Advantage markets are highly concentrated, with this trend worsening since 2009.
• A majority of enrollees (70%+) were in markets dominated by two or three insurers between 2009–2017.
• An average of six potential competitors were identified in MA markets, suggesting untapped competitive potential.

Conclusions:

• High market concentration in Medicare Advantage may lead to overpayment by taxpayers and beneficiaries.
• Potential competition exists but requires further research to understand entry barriers.
• Activating potential competition is key to realizing intended efficiencies and savings in MA.