Medicare Advantage Markets Are More or Less Competitive

If you read the headline of this blog post in the form of a question, the answer, I think, is both.

That’s my interpretation of some interesting health insurance market stats in the American Medical Association’s latest Competition in Health Insurance: A Comprehensive Study of U.S. Markets report.

If you’re into healthcare market competition like me, the annual report from the AMA is a real page-turner. If you’re not, the 78 pages will put you to sleep by the second page of the introduction.

For the first time, the report included health insurance market data for Medicare Advantage plans, the alleged money-saving Medicare privatization experiment that’s costing Medicare more money because MA plans have figured out how to game the MA payment formula.

AMA researchers analyzed MA plan market shares in 380 metropolitan statistical areas in 50 states to come up with the following:

• 79% of the MSAs were “highly concentrated” in terms of MA plan market shares, under the antitrust guidelines used by the U.S. Justice Department and Federal Trade Commission. Highly concentrated essentially means few competitors and not much competition.
• In 91% of the MSAs, at least one MA plan controlled more than 30% of the market.
• In 34% of the MSAs, at least one MA plan controlled more than 50% of the market.
• And in 6% of the MSAs, at least one MA plan controlled more than 70% of the market.

“High concentration levels in health insurance markets are largely the result of consolidation (i.e., mergers and acquisitions) which can lead to the exercise of market power and, in turn, harm to consumers and providers of care,” the AMA said in the report. “Conceptually, mergers and acquisitions can have beneficial and/or harmful effects on consumers. However, only the latter has been observed.”

What a classic dry burn from the AMA! I’m sure the writers were snickering over that one.

Anyways, that’s the bad news, and it could help explain why MA plans are breaking the Medicare bank. Not only are they manipulating the payment formula, but there’s also virtually no one to stop them in a market scarce with competitors. No one to say, “Join our plan! We’re not cheating taxpayers!!”

To the AMA’s credit, it did acknowledge that the percentage of highly concentrated MA dropped a bit since 2017. That year, 87% of the MSAs were highly concentrated in terms of MA plan market shares compared with 79% in 2021.

I guess that’s the good news. Things are slightly less anti-competitive.

To learn more about this topic, please read “It’s Your Move: Health Insurers Counter Provider Consolidation,” on 4sighthealth.com.

Thanks for reading.