Report: Medicare Advantage Delivers $32.5 Billion Annually in Additional Value to Seniors Through Lower Cost-Sharing, Extra Benefits

Better Medicare Alliance, the nation’s leading advocacy organization supporting Medicare Advantage, announced the release of a new report commissioned by its 501(c)3 research arm, the Center for Innovation in Medicare Advantage, and conducted by Milliman highlighting the value of Medicare Advantage to the federal government.

Milliman’s report finds that “the [federal] government’s dollar goes farther with MA plans providing Medicare-covered benefits at least as generous as FFS for less than what the same benefits cost under FFS Medicare.” 

The report goes on to note that Medicare Advantage provides $32.5 billion annually ($123.36 per member per month) in additional benefits and lower out-of-pocket costs for beneficiaries. Specifically, data show that Medicare Advantage plans cover the same hospital and physician services at 24% lower cost per member per month (PMPM) than FFS Medicare ($709.66 in MA vs. $935.67 in FFS) excluding administrative expense and profits.

Milliman additionally finds that, when including these considerations, “total FFS payments [per month are] slightly higher than total MA payments ($949.39 vs. $942.43) for beneficiaries of a similar health status.”

In reaching these figures, Milliman researchers applied a sensitivity analysis by adjusting FFS Medicare costs by +/-5% to account for the possibility that government payments to Medicare Advantage and FFS Medicare are not directly comparable. The sensitivity analysis shows that “even with 5% lower FFS Medicare costs for Medicare-covered services, MA is still less expensive in total program costs than FFS.” 

“This independent, actuarial report offers an important look at Medicare Advantage’s value to beneficiaries and the federal government,” said Mary Beth Donahue, President and CEO of the Better Medicare Alliance. “At a time when lawmakers are weighing important policy considerations for seniors’ health care, Milliman’s findings demonstrate that Medicare Advantage delivers additional benefits and reduced cost-sharing.”

“Our analysis determined that each dollar spent by the federal government on Medicare Advantage provides beneficiaries with additional benefits and lower cost sharing than they would otherwise receive under FFS Medicare,” said David Mike, FSA, MAAA, Principal and Consulting Actuary at Milliman. “Medicare Advantage plans cover the same services offered by FFS Medicare at lower costs than FFS, lowering government spending on Parts A and B services and enabling the savings to be deployed toward additional benefits and lower out-of-pocket costs for MA beneficiaries.”  

“With this report, Better Medicare Alliance’s Center for Innovation in Medicare Advantage makes a substantive contribution to understanding Medicare payment and value,” said Susan Dentzer, Senior Policy Fellow at the Robert J. Margolis Center for Health Policy at Duke University and Member of the Center for Innovation in Medicare Advantage Board of Directors. “The successes of Medicare Advantage noted in this report include $32.5 billion in added value each year to beneficiaries, funded by lower costs that Medicare Advantage health plans generate on basic Medicare-covered services. This information will be helpful to lawmakers as their work on possible Medicare reforms continues.” 

“Separate research from ATI Advisory shows that roughly half of Black Medicare beneficiaries today choose Medicare Advantage, with Morning Consult polling showing a 99% Medicare Advantage satisfaction rate among racial and ethnic minority beneficiaries. With this report, we see the positive effects for the government, too,” said Daniel E. Dawes, JD, Executive Director of the Satcher Health Leadership Institute at the Morehouse School of Medicine and Member of the Better Medicare Alliance Council of Scholars. “Milliman’s research provides pertinent information showing how Medicare Advantage offers the same services for lower costs along with added benefits that older adults rely on.”

Read the full Milliman report here.

Read a condensed analysis of the report from Better Medicare Alliance’s Center for Innovation in Medicare Advantage here.

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