The Unprecedented Growth of Medicare Advantage and What You Need To Know

Medicare Advantage has witnessed consistent growth in enrollment over the past two decades, thanks to policy amendments aimed at bolstering the role of private plan options within Medicare. The Medicare Modernization Act of 2003 was a turning point, offering better financial incentives for plans to join the program nationwide and rebranding private Medicare plans as Medicare Advantage. 

Fast forward to 2024, a whopping 30.8 million individuals have enrolled in a Medicare Advantage plan, making up over half (51%) of the eligible Medicare populace and accounting for $454 billion (or 54%) of the total federal Medicare expenditure (net of premiums). The average beneficiary in 2024 now has access to 43 Medicare Advantage plans, marking the highest available options.

Key takeaways include:

  • A significant 51% of eligible Medicare beneficiaries have opted for Medicare Advantage in 2024.
  • The proportion of Medicare beneficiaries enrolled in Medicare Advantage varies significantly across counties. By 2024, almost a third of Medicare beneficiaries will be living in a county where at least 60% of all Medicare beneficiaries are enrolled in Medicare Advantage plans, while 10% will reside in a county where less than one-third of all beneficiaries are enrolled. This difference can be attributed to multiple factors, such as the health insurance company’s strategy, urbanization, Medicare payment rates, number of beneficiaries, healthcare usage trends, and historical market penetration of Medicare Advantage.
  • A few firms largely dominate enrollment in Medicare Advantage. UnitedHealthcare and Humana alone cater to nearly half (47%) of all Medicare Advantage enrollees nationwide. In about 32% of counties, these two firms cover at least 75% of Medicare Advantage enrollment.

Currently, Medicare Advantage looks like this in 2024:

  • Over half (51%) of eligible Medicare beneficiaries, translating to 30.8 million out of 60.0 million, are enrolled in Medicare Advantage plans. This is a significant leap from a 19% enrollment rate in 2007 to 51% in 2024.
  • The year-on-year growth between 2024 and 2024 saw an addition of about 2.3 million beneficiaries, marking an 8% growth rate, consistent with the previous year’s growth rate.
  • The Congressional Budget Office (CBO) projects a rise in Medicare Advantage enrollment to 62% by 2033.

In 2024, Medicare Advantage enrollees are distributed as follows:

  • Nearly two-thirds (64%) of enrollees, or 19.6 million people, are in individual plans open for general enrollment.
  • About one in five (5.4 million) enrollees are part of a group plan offered to retirees by an employer or union.
  • Over 5.7 million beneficiaries are enrolled in Special Needs Plans (SNPs), doubling the enrollment since 2018.

The geographic distribution of Medicare Advantage enrollees varies widely across states and counties, with three states (AL, HI, and MI) and Puerto Rico having 60% or more of their Medicare beneficiaries enrolled in Medicare Advantage plans. On the other hand, 16 states and the District of Columbia have less than 40% of their beneficiaries enrolled in such plans.

The Medicare Advantage market is highly concentrated, with a few firms dominating. UnitedHealthcare and Humana alone account for nearly half of all Medicare Advantage enrollees nationwide in 2024. The number of firms offering Medicare Advantage plans to beneficiaries in 2024 will range from nine to ten or more, depending on the beneficiary’s location.

The steady rise in Medicare Advantage enrollment underscores its growing prominence within the Medicare program. Medicare Advantage plans receive higher payments than traditional Medicare for similar beneficiaries, so it’s imperative to evaluate the effectiveness of Medicare’s current payment methodology for Medicare Advantage in reducing beneficiary costs and Medicare spending. Monitoring the service quality in both Medicare Advantage and traditional Medicare, in terms of costs, benefits, quality of care, patient outcomes, and provider access, especially for those with greater needs, is imperative. 

While there’s a growing body of research comparing Medicare Advantage and traditional Medicare, data gaps in Medicare Advantage hinder the evaluation of whether higher spending is yielding better value for enrollees and taxpayers, better outcomes, or reduced disparities.