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Our Take

Achieving sustainable growth in Medicare Advantage

15 Minute Read

Health plans large and small are prioritizing growth in Medicare Advantage—for good reason. Medicare Advantage (MA) products have seen tremendous growth in membership and profits over the last 10 years, stemming not just from organic growth but also from favorable government reimbursement and strategic investments from health plans.

Aggregate, industry growth in Medicare Advantage, however, does not guarantee individual plan success. The MA market has grown both more crowded and increasingly dominated by large players, which makes standing out against the competition more challenging. Yet key drivers of MA sales and growth often remain misunderstood, hindering some carriers' ability to break into new markets and grow membership. Health plan executives must equally focus on the intricacies of product design, MA sales structures, and operations to achieve sustainable growth.


What is Medicare Advantage?

Medicare Advantage (MA) is health insurance for seniors aged 65+ delivered by private health plans who are contracted and reimbursed by CMS. Medicare Advantage plans are contracted to provide Medicare Part A and Part B benefits; most MA plans now also provide prescription drug coverage (Part D). Medicare Advantage differs from “Medigap” or “Med Supp” products that are also delivered through private health insurance companies but are meant to supplement traditional Medicare coverage and do not provide full Part A and B benefits.

More on caring for seniors

Explore the collection of resources that our team has developed to help you understand how the industry is currently caring for older adults (ages 65+), why change is essential, and how industry stakeholders can collaborate to build a better care model for seniors.


The conventional wisdom

Growth in Medicare Advantage is one of the primary indicators of MA product health and success. While strategic approaches to growth vary across plan types, the discussion of growth in Medicare Advantage is often centered around three key ideas:

1. Medicare Advantage is driven by “organic growth” of baby boomers reaching the age of 65.

Many health plans focus on growing MA membership through organic growth from seniors aging into Medicare eligibility at age 65. This growth is considered “organic” as it is driven by a population entering an entirely new insurance line of business (i.e., not dependent on “stealing” membership from other plans). While organic growth is certainly a contributing factor, growth in the MA space is not happening passively. Health plans place outsized attention on MA sales and marketing programs, while making strategic investments in MA products—these efforts enable a self-fulfilling growth prophecy.

2. Growth in Medicare Advantage is achieved by offering the most attractive supplemental benefits.

Increasingly popular supplemental benefits like transportation assistance or meal delivery often dominate the Medicare Advantage headlines. These types of benefits have rapidly increased in availability and utilization since CMS expanded the definition of health-related supplemental benefits. However, supplemental benefits on their own are insufficient for achieving sustainable growth. Seniors can often select from many plans offering the same supplemental benefits, making this a secondary factor in differentiating for growth. Accordingly, consumers rank physician network inclusion and cost as more impactful factors than supplemental benefits when picking a plan.

3. Rapid growth in the Medicare Advantage space is a guarantee of financial success.

Medicare Advantage plans often link rapid membership growth with product success—but the ability to attract new members does not equate to financial success. Plans often fail to turn a profit in the first three years of entering a new market—regardless of new enrollment—due to costly investments such as contracting with an expansive physician network or offering rich supplemental benefits. In the long run, membership growth is not enough to succeed financially. Rather than focusing solely on membership growth, plans must dedicate resources to managing a profitable balance of services and coverage while executing on core operations (such as coding and risk adjustment) that drive long-term financial success.


Our take

Conventional wisdom on growth in Medicare Advantage leads to the assumption that nearly anyone can be successful in this space (or that past success is a guarantee of future growth). Below, we’ve outlined three nuanced insights that plans must understand in order to achieve growth in MA.

1. Organic growth in Medicare Advantage writ large is not a guarantee of individual plan success.

An aging population guarantees growth in Medicare Advantage generally but not growth in your plan specifically. The hyper-competitive Medicare Advantage market means that plans face fierce barriers to growth; when sizing opportunities in a given market, plans must glean a detailed understanding of current MA penetration rates, market demographics, and physician relationships. Entrants to a new market will likely encounter incumbency bias from plans with an established name, physician network, and the financial heft needed to attract larger swaths of the population. Organic growth in the MA-eligible population and historic growth trends are encouraging, but plans must prepare for growth under challenging circumstances and avoid the assumption of passive growth.

2. Growth in Medicare Advantage requires exceptional execution on the core functions of a health plan coupled with savvy in benefit design.

Standing out on supplemental benefits alone is nearly impossible to do in the crowded Medicare Advantage field—and insufficient for growth when coupled with competing priorities of broader product and network design. Plans need to come to market with a product that meets baseline competitive standards to attract early members while continuing to strengthen physician networks, foster broker relationships, and modify product design to reach target members. Supplemental benefits, necessary but insufficient for a competitive product, should appeal to a variety of needs and reflect member preferences and competitor offerings.

3. Sustainable growth is predicated on operational efficiency to manage member populations and optimize financial performance.

Medicare Advantage is a highly regulated and dense operational space. Understanding and appropriately reporting on quality measures and risk adjustment is resource intensive but essential for both care management and optimizing revenue generation. Financial success, especially as a new plan, is not guaranteed; mature MA plans have established feedback loops for financial performance that contribute to their incumbent advantage. One essential area of focus is Star quality ratings; documentation and improvement here is extremely resource intensive, but directly linked to financial outcomes like bonus payments and rebates. Strong financial performance in Medicare Advantage is a cornerstone for reinvestments in growth, including robust benefit design and sales and marketing engines.


Three strategies for achieving sustainable growth in Medicare Advantage

To realize lasting growth in Medicare Advantage, health plans—both new entrants and established competitors—need to optimize performance on the key functions of a health plan while strengthening the differentiators of their Medicare Advantage product. Medicare Advantage leaders need to approach each decision with an eye both on how individual investments strengthen your portfolio and how they compare to your market competition.

Growth in this highly competitive market is achieved through a positive feedback loop anchored in three key strategies. In the following pages we’ll dive deeper into each of these strategies and provide important considerations for health plan leaders.

  • Strategy

    Craft an appealing product for evolving market needs

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  • Strategy

    Grow new membership with targeted sales and marketing

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  • Strategy

    Increase profitability through optimized operations

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Parting thoughts

Despite fierce competition, Medicare Advantage is a hot growth market. Growth, however, is not guaranteed: Payers must approach Medicare Advantage strategically to carve out your unique identity and achieve sustainable growth. Growing your Medicare Advantage product is a never-ending process, dependent on upfront planning and product design, as well as a positive feedback loop that optimizes operations and financial performance to reinvest in benefit design and sales partnerships.

As Medicare Advantage enrollment continues to grow so do the total dollars being paid by CMS to operate the program. Accordingly, Medicare Advantage has come under increased scrutiny for costs and will continue to draw attention as an area for potential Medicare savings given the program’s size. Plans must factor political pressure on Medicare Advantage into their long-term growth projections. Given the highly regulated dynamics around Medicare Advantage, the uncertainties related to future government action may ultimately be the biggest barrier to continued growth.

Furthermore, macro-level policy discussion related to Medicare creates additional uncertainty for future growth in the Medicare Advantage space. Proposals such as lowering the Medicare eligibility age or incorporating dental, hearing, and vision benefits into traditional Medicare have the potential to change the size of the Medicare-eligible market as well as the relative appeal of Medicare Advantage. Though sweeping changes are unlikely in the immediate future, they are necessary considerations for any discussion on sustainable growth in the Medicare Advantage space.

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