Posted by Robert M. Brecht, Ph.D. | Jan 28, 2015
Medicare Advantage plans continue to flourish. As of January 1, 2015, which reflects applications accepted through December 4th, 2014, enrollments were up 8% compared to the same period a year ago. If that number holds up, enrollment will approach 17 million beneficiaries in 2015. While numbers for 2015 are not final, in 2014 30% of Medicare beneficiaries were enrolled in MA plans. That’s up from 28% in 2013. Where this growth is coming from may surprise many marketers.
Where Are New Members Coming From?
Aside from the 10,000 baby boomers turning 65 every day, the growth in Medicare Advantage Plan enrollments has also been the result of three factors:
- Medicare beneficiaries switching from traditional Medicare to Medicare Advantage plans.
- The tendency of the poor to select Medicare Advantage plans over other Medicare coverage options.
- The tendency of minorities to select Medicare Advantage coverage over other forms of coverage.
An interesting caveat is that these factors have a common underpinning. They occur in highly established Advantage service areas, i.e., with high Medicare Advantage plan penetration and a high number of available MA plans in the market.
Three studies make the case for these assertions.
1) Health Affairs: At Least Half of New Medicare Advantage Enrollees Had Switched from Traditional Medicare During 2006 – 2011
According to an article in Health Affairs, 22% of those new to Medicare, i.e., the first boomers eligible, chose Medicare Advantage over traditional Medicare in 2011. They made up 48% of new Medicare Advantage plan enrollees. As can be seen in the Health Affairs chart below, those new to Medicare made up a minority, although increasing, percentage of new Medicare Advantage plan members from 2006 through 2011. More than half of new Advantage plan enrollees still came from those that switched from traditional Medicare.
During the study period, the authors founds that the rate at which beneficiaries switched between traditional Medicare and Medicare Advantage Plans (3.1 – 4.5%) and vice versa (3.8 – 4.8%) were comparable. The study found that 11% of those in traditional Medicare in 2006 had switched to a Medicare Advantage plan by 2011 while 10% of beneficiaries in a Medicare Advantage plan in 2006 had switched to traditional Medicare by 2011.
If that’s the case, shouldn’t they cancel each other out? Sounds like a reasonable question. The difference is in the starting numbers. Traditional Medicare had over four times the number of enrollees in 2006 compared to Medicare Advantage plans. The result was that 3.6 million beneficiaries switched to Medicare Advantage plans while nearly 800,000 beneficiaries switched in the other direction. The difference is graphically depicted from this chart from the article.
The largest rate of switching between traditional Medicare and Medicare Advantage plans occurred:
- in the 65 – 69 age group; the odds were 18% higher than for the 70 -74 age group.
- in counties with Medicare Advantage plan penetration rates of 10% or more.
The largest rate of switching between Medicare plans and traditional Medicare occurred:
- in beneficiaries less than 65 years of age
- in Dually Eligible beneficiaries
- in counties with MA plan penetration rates of less than 5%
2) The Medicare Payment Advisory Commission (MedPAC) Report:Medicare Advantage Demographics and Enrollment Patterns
This report examined Medicare Advantage plan participation rates in 2012. For all beneficiaries, the participation rate was 28% for that year. Their findings:
- MA participation rates were above average with the 65 to 79 age groups with the highest rate (32%) in the 70 – 74 age group.
- Minorities have much higher MA participation rates while Non-Hispanic Whites have an average participation rate.
- Hispanics had the highest participation rates among race/ethnic groups at 39% in 2012.
- Populations less likely to enroll in MA are the same as shown for switching from MA plans: beneficiaries under 65 and dually eligible beneficiaries.
- Hispanics have high participation rates when MA plans have high penetration. They have low participation where MA penetration is low.
- Eighty percent of those who switched moved from one MA plan to another with 20% switching from MA to traditional Medicare.
- When beneficiaries switched MA plans, in most cases they selected a plan with a lower premium.
3) America’s Health Insurance Plans, Center for Policy and Research Report: Low-Income & Minority Beneficiaries in Medicare Advantage Plans, 2011.
The report’s findings include the following relative to MA plans participation rates.
- Nationwide average participation was 28%.
- Above average participation rates for MA plans among African-Americans (31%) and Hispanics (38%).
- Above average participation for beneficiaries with incomes between $10,001 and $20,000 (33%); and $20,001 and $30,000 (31%).
- Higher income beneficiaries were more likely to have employer-based coverage: 44 % of those with income between $40,001 and $50,000; and 51% of those with incomes over $50,000,
- When you factor both income and minority status, the participation rate increases even further. Sixty-one percent of minority beneficiaries enrolled in Medicare Advantage plans had incomes of $20,000 or less.
This may sound counterintuitive but the greatest opportunities for Medicare Advantage plan marketers are in service areas that have high MA penetration rates and with a large number of MA plans. That’s especially true where you have high minority populations and a lot of low-income beneficiaries in a metro area. Hispanics are a very appealing target audience with the highest participation rates of any race/ethnic group.
The greatest Medicare Advantage marketing opportunes include beneficiaries enrolled in traditional Medicare and newly eligible minority and low-income beneficiaries.
If you don’t have them already, focus on getting more minorities with incomes of less than $30,000.
Granted, the data is from 2011 and 2012. By now new Medicare enrollees may constitute a higher percentage of Medicare Advantage plan enrollees than switched. The income and minority data is largely static so I don’t expect it to have changed much from 2012.
Do you agree with me on the cause of growing enrollments in Medicare Advantage plans?
What other factors would you suggest?
Share with us so we can all learn.