To capitalize on the rapid growth in membership, insurers need to rethink the way they design and administer MA plans.

There is great uncertainty surrounding attempts to repeal, reform, or replace the Affordable Care Act (ACA). But as we’ve noted, market participants can’t afford to sit still. Regardless of what happens, there is one very significant sector of healthcare that is positioned to succeed in this environment of uncertainty: Medicare Advantage (MA). As baby boomers age into qualification for Medicare, members are more likely to opt for plans that have benefits beyond what Medicare has traditionally offered. As a result, MA will present a significant source of growth for insurers. But to access a substantial share of this profit, plans need to urgently invest in key differentiating capabilities.

Some background: The federal government provides healthcare insurance for seniors through Medicare, which is administered by the Centers for Medicare and Medicaid Services (CMS). Although Medicare reimburses providers, it doesn’t cover all costs. This is where Medicare Advantage comes into play. Members have the option of purchasing MA plans from private insurers to cover out-of-pocket costs. The majority of Medicare recipients do not choose MA plans, either because they aren’t aware of them or because their preferred doctors may not always be part of the plans, but the numbers are growing. Based on CMS data, more than 32 percent of Medicare members in 2016 — some 19 million out of the 58 million total — enrolled in MA plans. But this is just the beginning. Analysis from Strategy&, PwC’s strategy consulting business, projects that over the next eight years, enrollment in MA will rise at a compounded annual rate of between 7 and 12 percent. Accordingly, we expect annual revenues for MA plans to rise from US$215 billion in fiscal year 2017 to more than $500 billion by 2025.

The underlying growth of MA is good news for healthcare payors. But not all participants will benefit equally. Given the structural and market forces at work, the total number of profitable MA plans is actually likely to decrease even as the number of participants surges. In this winner-take-all market, between $10 billion and $15 billion per year in total industry profits will shift toward a smaller number of higher-performing plans.

As they sign up more members, plans operating in the MA market in the coming years will have to grapple with a host of external and internal challenges to their profits. These include cost pressures, lower reimbursement rates, increasingly stringent compliance requirements, and the double-edged sword of performance-driven reimbursements. CMS conducts an annual assessment of MA plans based on performance in a range of areas, including patient experience, access to care, and clinical care outcomes. The results of this assessment are published as star ratings, with the best-performing plans receiving a five-star rating. CMS offers substantial financial incentives in the form of bonus payments to plans with a higher star rating. Additionally, a small proportion (i.e., up to 5 percent) of the reimbursement payments are tied to these quality ratings.


Read more: https://www.strategy-business.com/article/How-to-Succeed-in-the-Booming-Business-of-Medicare-Advantage

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