Medicare Advantage (MA) is a government-sponsored program offering an alternative to traditional fee-for-service (FFS) Medicare, where benefits are provided to Medicare beneficiaries by private health plans, otherwise known as Medicare Advantage organizations (MAOs). MAOs offer plan designs with varying benefits and premiums. In the Milliman MACVAT®, each MA plan’s benefit offerings and premium are evaluated to create an associated “value added,” Milliman’s proprietary measurement of plan value.
This white paper highlights changes in value added and key benefit trends in the MA market from 2023 to 2024. This discussion focuses on general enrollment plans (that is, plans that do not target beneficiaries who are dually eligible for both Medicare and Medicaid, have certain chronic conditions, or require an institutional level of care). A separate paper discussing dual-eligible plans can be found here.
Average value added of general enrollment MA plans is level from 2023 to 2024, after years of significant increases
Figure 1 shows the average annual growth in value added (total, Part C, and Part D) from 2021 to 2024. It also shows the components of value added, which are benefit value (Part C and Part D) and member premium (Part B buydown and Part C plus Part D premium) from 2021 to 2024.
Figure 1: Average value added, benefit value, and premium PMPM growth and decline for general enrollment MA plans in the last four years
Average total value added grew about $20 per member per month (PMPM) each year from 2021 to 2023 but grew just under $3 from 2023 to 2024. From 2021 to 2023, the total value added of general enrollment MA plans grew by about 10% to 12% per year, due to enhancements in Part C (medical) and Part D (drug) benefits, coupled with reductions in member premiums. From 2023 to 2024, however, average growth in total value added is about 1%, significantly less than previous years.
This substantial slowdown of benefit growth in the MA market is driven by:
- Less significant premium reductions from 2023 to 2024 by MAOs than previous years:
- The total member Part C plus Part D premium was only reduced about $0.30 PMPM relative to nearly $3 PMPM decreases in prior years.
- A significantly smaller increase in the level of Part B buydowns offered for general enrollment plans. In recent years, MAOs were investing in this attractive benefit, with about $2 PMPM growth in this plan design option year over year. In 2024, the growth in continuing to offer this benefit is still positive but only about $1 PMPM.
- Fewer reductions in Part C benefit value (i.e., MAOs are reducing benefit levels or are keeping them level versus investing in additional offerings or increasing the richness of offerings). This trend impacts both Medicare-covered benefits and supplemental benefits, which are discussed in more detail below.
Part D benefit value increased by over $3 PMPM from 2023 to 2024 due to changes to the Part D program. This increase is not driven by benefit enhancements in the Part D benefit by plan sponsors but instead by changes mandated by the Centers for Medicare and Medicaid Services (CMS), such as moving pharmacy rebates to the point of sale, introducing coverage of vaccines and insulins under the basic Part D benefit, and removing member cost sharing in the catastrophic phase, all of which led to increases in the direct subsidy to plans in 2024 relative to prior years. These programmatic changes, many of them introduced by the Inflation Reduction Act (IRA)1, 2, 3 result in more Part D benefit value for beneficiaries.
Part C benefit value decreased by about $2 PMPM from 2023 to 2024. This demonstrates plans did not enhance their medical benefits year over year for the first time in the recent history of the MA program. This may be due to actual and anticipated revenue pressures on the MA program, as some plans are experiencing or anticipating reductions in star ratings due to new measurement standards4, 5, 6 in addition to reductions in risk scores due to the v28 change in Hierarchical Condition Category (HCC) risk score model change,7 among other potential headwinds.
Medicare-covered benefit changes vary by benefit type
MA plans are required to cover all benefits covered by FFS Medicare and to also provide a medical maximum-out-of-pocket (MOOP) limit for annual member cost sharing. FFS Medicare benefits include inpatient services, outpatient services, professional services, and other services including ambulance and durable medical equipment (DME). Based on the value added metric and the benefit value attributed to these service types, it appears MAOs made smaller improvements in member cost sharing than in prior years or, in some cases, made benefits leaner than in 2023.
The average MOOP increased from about $4,700 to $4,750 from 2023 to 2024, increasing member cost-sharing liability for medical services by approximately 1% relative to 2023. A plan’s MOOP will most impact beneficiaries with high utilization of more costly services, such as inpatient or outpatient care, because these beneficiaries are more likely to reach the MOOP during the year. Average general enrollment MOOPs decreased in recent years prior to 2024, by 2% from 2021 to 2022 and 4.5% from 2022 to 2023.
Average inpatient and outpatient benefit value decreased by 5% and 6% from 2023 to 2024, respectively. This is partially driven by the increase in average MOOPs discussed above, but also due to some plans increasing beneficiary cost sharing in these categories.
Average primary care physician (PCP) and specialty care physician (SCP) copays decreased from 2023 to 2024. PCP and SCP average cost sharing has been steadily decreasing since 2017, with reductions from $1.39 to $1.09 and $28.21 to $27.28 from 2023 to 2024 for PCP and SCP copays, respectively. The continuing decrease in cost sharing on these services amidst the decrease in Part C value added from 2023 to 2024 suggests MAOs consider low cost sharing on these services key to attracting and retaining membership in the general enrollment market.
General enrollment plans continue to enhance key supplemental benefits
MA plans typically offer additional benefits not provided under FFS Medicare, referred to as supplemental benefits. This discussion focuses on mandatory supplemental benefits and excludes optional supplemental benefits, for which members elect coverage and pay an additional premium. Dental, vision, hearing, over-the-counter (OTC) benefit card, and fitness benefits have consistently been the most popular supplemental benefits offered by general enrollment plans, and this remains true in 2024. Figure 2 shows the average annual limits for dental, vision hardware, and hearing hardware in 2023 and 2024. For plans with shared limits across preventive and comprehensive dental services, the shared limit is included in both the average preventive limit and average comprehensive limit calculation.
Figure 2: Average annual dental, vision, and hearing limits for general enrollment MA plans in 2023 and 2024
Average dental, vision hardware, and hearing hardware limits increased from 2023 to 2024 among general enrollment plans offering these benefits, for which over 90% of beneficiaries have coverage in 2024. This is in contrast to the dual-eligible special needs plan (D-SNP) market where, on average, limits for these services decreased from 2023 to 2024. While plans can offer separate preventive and comprehensive dental limits, many choose to offer a combined limit across all dental services. About 60% of plans are offering a combined dental limit in 2024.
Figure 3 shows the average annual monthly limit for an OTC benefit card for 2021 through 2024.
Figure 3: Average monthly OTC benefit card limits for general enrollment MA plans in 2021 through 2024
Average OTC benefit card limits remained level from 2023 to 2024, with an average limit of about $25 per month, after increasing from about $22 per month in 2021. This is in contrast to the D-SNP market where, on average, limits for OTC benefit cards increased from 2023 to 2024. Plans can choose the periodicity of their OTC benefit card (monthly, quarterly, annually) and choose whether the benefit rolls over to the following period or not. While the average monthly limit held steady, fewer beneficiaries have an OTC card benefit in 2023 than in 2024, with 90% of beneficiaries covered in 2023 and only 86% of beneficiaries covered in 2024.
Fitness benefit offerings are a key innovation area in the general enrollment MA market. Fitness benefits covering gym memberships have been offered to over 90% of beneficiaries since 2020, but fitness benefits with limits as high as $1,200 annually are entering the market in 2024. One large national carrier’s 2024 benefit allows beneficiaries to use their allowance on fitness-related services, activities, and equipment. While a few regional plans have offered similar benefits for many years, a national carrier offering this benefit may trigger other MA carriers to follow suit.
Combined benefit offerings continue to grow in 2024
Combined benefits, or “combo” benefits, are designed to include multiple supplemental benefits in one package and may have a total dollar limit across all benefits in the package. Many different combinations of benefits are offered through this design. While shared preventive and comprehensive dental limits fall into the combo benefit category when filed in the plan benefit package (PBP), we do not include them in this discussion—we focus on “true” combo benefits, which include multiple types of unrelated benefit types. Figure 4 shows the percentage of general enrollment plans in 2023 and 2024 offering specific benefit combinations for the most common combined benefit structures.
Figure 4: Percentage of general enrollment MA plans offering specific combined benefit structures in 2023 and 2024
Dental, vision, and hearing benefits are a common combined benefit structure. While the prevalence of dental, vision, and hearing benefits alone decreased from 2023 to 2024, the shift toward plans offering these three benefits plus an OTC benefit card accounts for most of the decrease. A similar trend is observed in the D-SNP market.
Combined benefits including an OTC benefit card increased from 2023 to 2024. One large national carrier is offering plans that include OTC combined with home and bathroom safety devices in 2024, which is driving the significant increase in the ”OTC and Other” category from 2023 to 2024 (and which applies to the D-SNP market as well). Other benefits often combined with OTC are dental, vision, hearing, fitness, and nonuniform benefits. Nonuniform benefits are benefits for which not all members are eligible, such as Value-Based Insurance Design (VBID) and Special Supplemental Benefits for the Chronically Ill (SSBCI).
The percentage of beneficiaries with at least one true combo benefit nearly doubled from 25% to 45% from 2023 to 2024. This significant increase of true combo benefit prevalence in the general enrollment market indicates plans are moving toward benefits allowing member choice and flexibility. As combo benefits become more prevalent in the MA market, member understanding of how these designs work and how to use them may improve as well, leading to increased utilization of these benefits.
Methodology
To perform these analyses, we relied on detailed information on MA benefits, premiums, and enrollment as released by CMS. Enrollment used to calculate weighted averages is from February of each year, with the exception of 2024, which relies on September 2023 enrollment cross-walked to 2024.
The estimated value of the Part C and Part D benefits is evaluated using Milliman’s internal pricing models, including the 2024 Milliman Medicare Advantage Competitive Value Added Tool (Milliman MACVAT®), which is available for external license, calibrated to county-specific 2024 FFS costs with consistent medical management and population base assumptions for each county. This information is used in conjunction with plan-specific benefits, premiums, and benchmark revenue by county released by CMS to determine the value added for each plan.
This analysis excludes SNPs, Prescription Drug Plans (PDPs), medical savings accounts (MSAs), Medicare-Medicaid Plans (MMPs), Program of All-Inclusive Care for the Elderly (PACE), Part B only, and Cost plans. We excluded all U.S. territories from these results.
2025 will usher in more unknowns as revenue pressures increase
In 2024 MAOs, for the first time, adopted a more cautious approach to their general enrollment plan offerings and 2025 will almost certainly result in more significant benefit design changes, given the looming impacts of the IRA, the 2025 proposed rule, star rating methodology changes, revenue pressures, and risk model changes, just to name a few factors.
MAOs and other stakeholders should understand local market implications of the anticipated market changes noted above on general enrollment competitor benefit designs. Those that are able to better understand these changes in relation to their own strategic objectives will be better equipped to capitalize on 2025 headwinds.
Caveats, limitations, and qualifications
The information in this paper is intended to describe changes and trends in the Medicare general enrollment market. It may not be appropriate, and should not be used, for other purposes.
We relied on publicly available enrollment and premium data from the Centers for Medicare and Medicaid Services (CMS) and the Milliman MACVAT® to support the data presented in this paper. If this information is incomplete or inaccurate, our observations and comments may not be appropriate. We reviewed the data for reasonability but did not audit the data.
Milliman has developed certain models to estimate the values included in this paper. The intent of the models was to estimate the value added of services above traditional Medicare for 2024 Medicare Advantage Prescription Drug (MA-PD) plans, as well as summarizing all benefits offered in the MA-PD market from 2021 through 2024. Milliman has reviewed the models, including their inputs, calculations, and outputs, for consistency, reasonableness, and appropriateness to the intended purpose and in compliance with generally accepted actuarial practice and relevant Actuarial Standards of Practice (ASOPs).
Julia Friedman and Mary Yeh are members of the American Academy of Actuaries and meet the qualification standards of the American Academy of Actuaries to render the actuarial opinion contained herein.
1 Cline, M., Karcher, J., Klaisner, J.K., & Klein, M. (August 2022). Weathering the Reform Storm. Milliman Brief. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/weathering-the-reform-storm.
2 Ally, A.J., Berman, M., Klein, M., & Pierce, K. (September 30, 2022). The Inflation Reduction Act Passed, Now What? Milliman Article. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/the-inflation-reduction-act-passed-now-what.
3 Berger, C.N., Engel, T., & Wanta, T.M. (August 30, 2023). Part D Redesign Under the Inflation Reduction Act. Milliman White Paper. Retrieved January 9, 2023, from https://www.milliman.com/en/insight/part-d-redesign-under-ira-potential-financial-ramifications.
4 Rogers, H.M., Smith, M., Nelson, P., & Yurkovic, M. (October 2023). The Future Is Now: 2024 Star Ratings Release. Milliman White Paper. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/the-future-is-now-2024-star-ratings-release.
5 Rogers, H.M., Smith, M., & Yurkovic, M. (October 2023). Future of Medicare Star Ratings: The Reimagined CMS Bonus System. Milliman White Paper. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/future-of-medicare-star-ratings-reimagined-cms-bonus-system.
6 Rogers, H.M., Smith, M., & Yurkovic, M. (November2023). The Next Stage of Star Ratings Evolution: 2025 Proposed Rule and Beyond. Milliman White Paper. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/the-next-stage-of-star-ratings-evolution-2025-proposed-rule-cms.
7 Pipich, R., Cross, K., & Rothschild, M. (February 2023). High-Level Impacts of the Proposed CMS-HCC Risk Score Model on Medicare Advantage Payments for 2024. Milliman Article. Retrieved January 9, 2024, from https://www.milliman.com/en/insight/analysis-of-2024-cms-proposed-hcc-model.
8 Laktas, J., Yeh, M., & Friedman, J.M. (March 21, 2023). Prevalence of Supplemental Benefits in the General Enrollment Medicare Advantage Marketplace: 2019 to 2023. Milliman White Paper. Retrieved January 9, 2023, from https://www.milliman.com/en/insight/prevalence-supplemental-benefits-general-enrollment-ma-marketplace-2023.