Understanding factors associated with increases in Medicare Advantage enrollment, 2007-2018

Area of Science:

• Health Economics
• Public Policy
• Healthcare Management

Background:

• Private managed care plans within Medicare Advantage (MA) have significantly increased their market share compared to traditional fee-for-service Medicare.
• This growth has occurred without apparent structural changes to the Medicare program itself.

Purpose of the Study:

• To investigate and explain the reasons behind the dramatic increase in MA market share.
• To differentiate between changes in beneficiary characteristics and changes in preferences influencing MA enrollment.

Main Methods:

• Utilized a nonlinear Blinder-Oaxaca decomposition on a representative Medicare population sample (2007-2018).
• Decomposed MA growth into contributions from changes in explanatory variables (e.g., income, payment rates) and changes in enrollment preferences (coefficients).

Main Results:

• MA market share growth exhibited two distinct periods: 2007-2012 and 2012-2018.
• From 2007-2012, 73% of MA growth was attributed to changes in explanatory variables; from 2012-2018, changes in preferences (coefficients) offset a potential decline driven by explanatory variables, particularly payment levels.

Conclusions:

• Medicare Advantage is increasingly appealing to more educated and nonminority beneficiaries, though minority and lower-income groups remain more likely to enroll.
• Shifting beneficiary preferences suggest a future evolution of the MA program towards the demographic center of the Medicare population.