Status of Medicare Advantage

Medicare Advantage was born after the Balanced Budget Act of 1997 and the Medicare Modernization Act of 2003 and these plans have become increasingly popular.  Enrollment in Medicare Advantage plans has grown 42% since 2010.  The plans are projected to serve 17.6 million individuals in 2015 (31.5% of total Medicare enrollees) and expected to reach 30 million by 2025.

The U.S. government has been interested in expanding the role of these plans and has promoted competition amongst them.  The premise is that increased competition will suppress program spending.  Insurers who wish to be successful in the arena of Medicare Advantage must structure provider contracts which reward the providers for managing patients’ chronic conditions.  The insurers must also share population health data and infrastructure with various providers.  Additionally, the U.S. government has imposed a star rating which uses metrics to grade the plans in an attempt to improve clinical quality.

The Commonwealth Fund studied Medicare Advantage markets in more than 2,900 counties in the United States utilizing the Herfindahl-Hirschman Index (“HHI”).  The HHI is a standard measure of market concentration and is used by the U.S. Department of Justice Antitrust Division as well as the Federal Trade Commission.  With this index, these agencies classify markets into three categories:  nonconcentrated, moderately concentrated, and highly concentrated.  The study also included a detailed analysis of the 100 urban counties with the largest numbers of Medicare Advantage enrollees.

In short, the market share study indicated that there is little competition anywhere in the U.S. among Medicare Advantage plans.  In fact, it showed that 97% of the 2,933 counties fell into the “highly concentrated” category of the HHI.  Those counties comprised 77% of total Medicare Advantage enrollment and served 84% of all Medicare beneficiaries nationwide.  A mere 80 counties fell into the “moderately concentrated” category and only one county in the U.S. meet the criterion for a “nonconcentrated” market; that county is Riverside, California.

The Commonwealth Fund notes that its findings are consistent with previously reported studies by the American Medical Association and the Government Accountability Office.  The study can be found here.


Contact ABISA, a consultancy specializing in solo and small group practice management.  Visit us at

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s