A recent KFF analysis found that Medicare Advantage enrollees account for a rising share of inpatient hospital days. The growth corresponds to an increase in enrollment in private Medicare Advantage plans, now the most common source of Medicare coverage, and comprises 54% of eligible beneficiaries in 2024. People are drawn to Medicare Advantage because most plans offer extra benefits, such as dental, vision, and hearing coverage, and lower cost sharing compared to traditional Medicare without supplemental insurance, including a cap on out-of-pocket spending, usually for no supplemental premium (other than the Part B premium).
At the same time, Medicare Advantage differs from traditional Medicare in important ways, including the use of prior authorization and provider networks. This blog post reviews the key takeaways from the analysis and why it matters for both beneficiaries and healthcare providers.
What the analysis found.
Using data from hospital cost reports submitted to the Centers for Medicare and Medicaid Services (CMS), KFF found that between 2015 and 2022 the share of inpatient days attributed to Medicare Advantage across general short-term hospitals grew from 13% to 23%. The increase was fastest for non-metropolitan hospitals, which saw a doubling in the share of inpatient days attributed to Medicare Advantage enrollees.
The growth in Medicare Advantage also contributes to a shift in patient mix across hospitals, affecting some hospitals more than others. The share of hospitals with more Medicare Advantage than traditional Medicare inpatient days grew from just 5% in 2015 to 30% in 2022.
Medicare Advantage plans may impose higher costs for enrollees who obtain care from out-of-network providers.
Both across and within counties there was substantial variation in the share of inpatient hospital days attributed to Medicare Advantage enrollees. Medicare Advantage inpatient day shares were highest in counties with the highest Medicare Advantage penetration, averaging 27% of all inpatient days in counties in the top quartile of Medicare Advantage enrollment. Conversely, the share of inpatient hospital days attributed to Medicare Advantage was just 15% in counties in the lowest quartile of Medicare Advantage enrollment.
Although the share of Medicare Advantage inpatient days tracked county-level Medicare Advantage penetration, there was large variation within counties. For example, in Allegheny County, PA, a high penetration county, where 73% of eligible Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2022, Medicare Advantage enrollees accounted for just 11% of all inpatient days in one hospital but more than half in others. Even in relatively low penetration counties, there was substantial variation in the share of inpatient days attributed to Medicare Advantage. For instance, in Oklahoma County, OK, where 38% of beneficiaries were enrolled in a Medicare Advantage plan, the Medicare Advantage inpatient day share ranged from close to 0% to 24%.
Why it matters.
Unlike traditional Medicare, Medicare Advantage plans often require prior authorization before covering inpatient hospital stays. This requirement is one tool insurers use to lower costs by ensuring services are medically necessary, but it also increases the administrative burden on hospitals because they must submit documentation to the patient’s insurer to get approval for the services they intend to provide. In addition, Medicare Advantage plans also usually require prior authorization for skilled nursing facility stays, which can lead to discharge delays and longer hospital stays.
Medicare Advantage plans also are permitted to establish networks of providers, including hospitals, and may impose higher costs for enrollees who obtain care from out-of-network providers. Some hospitals and health systems have recently raised concerns about Medicare Advantage plans, including delays in payment, restrictive coverage determinations, and insufficient payment rates, and as of mid-October 2024, at least 28 health systems have indicated they are choosing to discontinue participation in at least one Medicare Advantage network.
As enrollment in Medicare Advantage grows, decisions made by insurers about which hospitals to include in the network, and decisions made by hospitals about whether to be in a Medicare Advantage network, can be expected to affect a larger share of the Medicare population.
Jeannie Fuglesten Biniek, PhD, is associate director for the Program on Medicare Policy and Jamie Godwin is senior analyst for the Project on Hospital Costs at KFF.
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