Reducing Medicare Advantage Benchmarks Will Decrease Plan Generosity, But Those Effects Will Likely Be Modest.

Area of Science:

• Health Economics
• Public Policy
• Health Services Research

Background:

• Medicare Advantage (MA) benchmarks, set by the Centers for Medicare and Medicaid Services (CMS), are central to MA plan funding and benefit offerings.
• Concerns regarding MA overpayments have led to proposals for reducing these benchmarks.
• Potential consequences of benchmark reductions include increased enrollee costs and reduced plan generosity.

Purpose of the Study:

• To evaluate the relationship between Medicare Advantage benchmarks and the generosity of MA plans.
• To quantify the potential impact of benchmark reductions on MA enrollee premiums, deductibles, copays, and benefit availability.

Main Methods:

• Econometric analysis was employed to estimate the associations between MA benchmarks and plan characteristics.
• The study modeled the effects of a hypothetical $1,000 annual decrease in MA benchmarks.

Main Results:

• A $1,000 annual benchmark decrease was associated with an estimated $60 increase in annual premiums and a $27 increase in annual deductibles.
• Modest increases in copayments were observed, alongside a general decline in benefit offerings of less than 5 percentage points.
• Dental, hearing, and vision benefits were identified as most vulnerable to reductions in benchmark funding.

Conclusions:

• Reductions in MA benchmarks are likely to have a modest adverse effect on MA plan generosity.
• The impact on enrollee financial burdens (premiums, deductibles) and benefit availability is estimated to be relatively small.