Trends in Selection Into Medicare Advantage

Medicare Advantage (MA) enrollment more than doubled from 2013 to 2023, raising concerns about risk selection, spending, and the continued use of traditional Medicare (TM) spending as a benchmark for MA payment. This study examines trends in selection into MA from 2009 to 2020 using administrative and survey data from the Medicare Current Beneficiary Survey. For each survey year, we estimate a regression model of Part A and B spending among TM enrollees based on demographic characteristics, self-reported health status, limitations in activities of daily living, and enrollee group type (e.g., dual eligible, institutionalized, disabled). We apply this model to MA enrollees to estimate their predicted TM spending. We find that since 2017, MA enrollees have had higher predicted costs than TM enrollees-5-6% higher from 2017 to 2020-driven largely by the growing share of dual eligibles in MA. Within enrollee group type, however, we observe little evidence of differential selection. We further use the model results from just our baseline year, 2009, to predict both MA and TM spending in each subsequent year. We find that although MA enrollee characteristics did not trend observably healthier or sicker over this period, TM enrollees' characteristics appear to have shifted in ways associated with lower predicted spending over time. These findings suggest that the nature of selection into MA has qualitatively shifted over recent years and raises further questions about how well the current risk adjustment system reflects appropriate differences in risk as the enrollee characteristics in these groups continue to diverge.