The vendorification of Medicare Advantage

Medicare Advantage (MA) plans increasingly outsource core functions to third-party vendors, a trend termed the "vendorification" of MA. Vendors now play major roles in star-rating maximization, risk-code capture, and prior authorization, with evidence that vendor-conducted prior authorization yields higher denial rates and more appeal reversals than reviews conducted internally by insurers. This commentary examines 3 potential challenges that may be posed by vendorification: increased federal spending through non-budget-neutral risk adjustment and quality bonuses, opportunities to game medical loss ratio requirements, and weakened accountability to beneficiaries' long-term health. Potential policy responses include mandatory reporting of vendor spending and, more fundamentally, reforming the payment incentives that make revenue-generating vendor services profitable.