Growth of Medicare Advantage After Plan Payment Reductions

Various policy proposals would reduce federal payments to Medicare Advantage (MA) plans. However, it is unclear whether payment reductions would compromise beneficiary access to the MA program.

To quantify the association between MA payment reductions under the Affordable Care Act (ACA) and MA enrollment growth.

This retrospective cohort study examined the MA market before and after the ACA, which mandated cuts to MA benchmark payment rates. Using 2008 to 2019 county-level enrollment and payment data, a difference-in-differences analysis was conducted comparing MA enrollment changes between counties with larger vs smaller benchmark reductions, before vs after the ACA.

The primary outcome was the MA enrollment rate, defined as the proportion of a county's Medicare beneficiaries enrolled in MA. A secondary analysis examined MA plan payments per member per month.

Among 3138 counties with 37 639 county-year observations, ACA-induced benchmark cuts were sizeable and varied, ranging from 0% to 42.9% (mean [SD], 5.9% [6.6%]). Counties with benchmark cuts above the 75th percentile had population-weighted average benchmark cuts of 14.9% compared with 4.4% in other counties. In the 8 years following the ACA, there was no differential change in MA enrollment between counties with larger vs smaller benchmark cuts (difference-in-differences estimate, 0.02 [95% CI, -1.18 to 1.21] percentage points; P = .98). Plan payments differentially fell in counties with larger benchmark cuts by $78.35 (95% CI, $62.21-$94.48) per member per month (P < .001).

This cohort study found no evidence that the MA benchmark and ensuing payment cuts imposed by the ACA were associated with reduced MA enrollment, compromising access to MA. This evidence can inform ongoing policy debates regarding the growth of MA, concerns about excess payments to MA plans, and proposed Medicare reforms, including further reductions in MA payments.