Medicare Advantage, under which CMS pays private health plans to provide Medicare benefits to seniors, has grown rapidly, to 37% of all beneficiaries, due to popularity with the elderly and health plan companies. Health care has suffered in recent decades as competition in most sectors has declined. A report from the Commonwealth Foundation probes whether this is occurring in Medicare Advantage as well. (Comm. Report) Looking at the period from 2009 to 2017, the authors looked at the competitiveness of markets in each county in the US. According to their analysis, markets are concentrated and have become more concentrated since 2009, using the traditional HHI measure. Many Medicare Advantage markets are served by one or a few insurers. Most of those are rural, but some are not. Typically in urban areas, seniors have a wide choice of plans, but most insurers are offering multiple plans, so the real competition is more limited. Looking at the averages across all counties (which is really a bad way to do this, you need to separate rural from urban markets), in 2009, the average was 9.9 plans and 4.5 insurers and in 2017 it was 6.9 plans and 2.5 insurers. The top two insurers in a county had an average of at least 81% of market share in all years. A more telling statistic is that 70% of enrollees were in highly concentrated markets by HHI measures.
But when you look by county population, there is less concentration. That makes sense, because plans are motivated to do business where they can get more enrollees. The authors also make a point that there are a number of plans in most areas that don’t currently offer an MA product, so that potential competition may constrain behavior. But the true reality, given the payment structure for MA and CMS’ price-setting powers, is that it matters less that markets are concentrated. And if you look at the premiums charged to enrollees by the plans, and the extra benefits they are offering, it is clear that consumers aren’t being ripped off. In fact, the number of zero-premium plans has risen, as has the level of supplementary benefits. And quality, as measured by CMS, has generally risen across all MA plans, so if there is a lack of competition, it isn’t showing up in reduced quality. What really drives Medicare Advantage success is the inefficiency of the fee-for-service arm. That is used to determine benchmark rates. Now CMS could force a more pure form of competitive bidding, and it probably should, which would save the program more money. But it is not currently apparent that concentrated markets are hurting the beneficiaries enrolled in MA plans. This report basically has a misdirected analysis and doesn’t really tell us anything meaningful about how much competition there is and how much it matters.