May 11, 2023by Jessica Hall May 9, 2023, Marketwatch.com Enrollment in Medicare Advantage surpassed traditional Medicare for the first time, and such growth costs taxpayers more and puts greater strain on the trust fund that supports Medicare. As of January, 30.19 million of the 59.82 million people with both Medicare Part A and Part B, or 50.5%, were enrolled in a private plan, according to nonprofit KFF, which focuses on health policy. That’s up from 19% in 2007. “The trend of growth has existed for a while. It’s not surprising that we crossed the milestone, it was just a matter of when. But it marks a moment for Medicare in that the majority are getting benefits from a private insurer,” said Jeannie Fuglesten Biniek, KFF’s associate director of the Program on Medicare Policy. Read: This investment move could trigger a huge Medicare penalty That growth makes Medicare Advantage, which is not available in all areas, such as rural markets, the predominant way that Medicare beneficiaries with Parts A and B get their coverage and care. Part A refers to inpatient hospital care, while Part B covers doctors visits and outpatient services. Medicare beneficiaries include older adults 65 and over and people under 65 with certain disabilities. Medicare Advantage, the private plan alternative to traditional Medicare, offers the convenience of one-stop shopping, with no need for a separate Part D prescription drug plan or supplemental coverage like Medigap. Medicare Advantage plans also may offer extra benefits such as vision, hearing and dental and the potential for lower out-of-pocket spending. There’s also an out-of-pocket maximum. However, the plans often come with prior authorization requirements, and necessary referrals to specialists and mental health providers, and limited provider networks. In 2021, Medicare Advantage enrollees submitted 35 million prior authorization requests. Medicare Advantage plans denied 2 million prior authorization requests in 2021, or almost 6% of such requests, KFF said. “Some view Medicare Advantage as better and they’re willing to take the restrictions. Or they don’t know about the restrictions,” Biniek said. Insurance companies contract with the Medicare program and receive payments for providing these services. In fact, Medicare Advantage programs are costlier: Medicare spends 6% more for Medicare Advantage enrollees than it would spend if those beneficiaries were enrolled in traditional Medicare, a difference that translates into a projected $27 billion in 2023, according to the Medicare Payment Advisory Commission report to Congress. Since the Centers for Medicare and Medicaid Services (CMS) pays Medicare Advantage plans more per person than traditional Medicare and there’s a growing number of Medicare Advantage customers, the more strain there is on the trust fund that backs Medicare, Biniek said. According to the recent trustees report, the hospital-insurance trust fund that supports Medicare Part A, is expected to be depleted in 2031. After that date, the program will not be able to pay full Part A benefits. “By overpaying, we’re spending down the trust fund faster,” said Bowen Garrett, senior fellow with the Urban Institute. Read: Social Security is now projected to be unable to pay full benefits a year earlier than expected “The evidence is that we overpay Medicare Advantage versus traditional Medicare and that level of overpayment seems to be growing,” said Richard Frank, senior fellow with the Brookings Institution. “Taxpayers are getting less for their money in some sense.” The insurance companies offering Medicare Advantage see great growth potential in that market, analysts said. “The plans do pretty well. If you look at the annual reports from Humana, UnitedHealthcare, Aetna and the like, they’re projecting a lot of their growth coming from Medicare Advantage. They’re doing well financially from Medicare Advantage,” Frank said. “The major question is to what extent are we overpaying and what extent are they picking off the best risks?” Frank said. Paul Van de Water, a senior fellow with the Center on Budget and Policy Priorities, said the competition between Medicare Advantage and traditional Medicare has kept both options vigorous and providing quality care and service. But if the pendulum swings further to Medicare Advantage, and traditional Medicare becomes less popular, there could be further increases in costs and potential deterioration in quality, he said. CMS collects a lot of data from traditional Medicare, but has a harder time getting data from the private insurers that provide Medicare Advantage, Van de Water pointed out. As a result, there’s not adequate data to judge if Medicare Advantage is providing superior service or not. Still, despite the growth of Medicare Advantage, traditional Medicare will remain. Medicare “won’t go away, but its relevance may diminish,” Biniek said. “How relevant is its fee structure when it’s used for fewer people?” “CMS still wields a pretty powerful tool. CMS still plays an important role. We don’t know how the dynamics would change if more private coverage existed,” Biniek said. A CMS spokesperson said “the payment rates that are established in traditional Medicare are not dependent on the number of people enrolled in traditional Medicare.”