Medicare Advantage (MA) plans face little in the way of competition––Medicare consumers are worse off for it, according to a new study from the American Medical Association (AMA).
The study shines a light on the lack of market competition and its potential impact on healthcare prices and care quality. Some previous studies have shown a link between a lack of competition and higher prices. One of the most glaring issues found in the study, Competition in Health Insurance: A Comprehensive Study of U.S. Markets, is that 79% of the metropolitan statistical areas (MSAs) in the study had MA markets with low levels of competition and ranked as “highly concentrated” by federal guidelines.
The study, which is an annual, comprehensive report by the AMA, is in its 21st edition and also the first time AMA has measured market competition for MA. MA plans, which are provided by private insurers that are paid by Medicare to insure the Medicare population, have quickly garnered a significant portion of Medicare. More than 28 million people are enrolled in an MA plan in 2022, according to data from KFF. That’s almost half of the eligible Medicare population.
The findings in the study should signal to policymakers that low levels of competition for MA markets need to be addressed, according to the AMA.
“The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) examine market shares and market concentration when evaluating proposed horizontal mergers and may also consider them when assessing vertical mergers,” the report stated. “Thus, it is critical to have this type of information readily available.”
However, M&A considerations are not all that regulators and policymakers should have their eye on. The report also found that in 91% of MSA-level markets, at least one insurer had a commercial market share of 30% or greater. In also half (48%) of markets, a single insurer’s share was at least 50%. Insurers have been able to scoop up huge market shares thanks to megamergers and mass consolidation across the industry over the last several years. In fact, despite more attention and scrutiny over healthcare M&A from regulators, multi-billion-dollar-deals are still a regular occurrence.
“Both consummated and proposed consolidation of health insurers should raise serious antitrust concerns,” the report found. “Conceptually, mergers and acquisitions can have beneficial and/or harmful effects on consumers. However, only the latter has been observed. It appears that consolidation has resulted in the possession and exercise of health insurer monopoly power—the ability to raise and maintain premiums above competitive levels— instead of the passing of any benefits obtained through to consumers.”
The AMA is also worried about allegations of fraud committed by MA plans. And with little competition to keep these insurers in check with the rest of the market, Medicare recipients might be getting the short end of the stick.
“High levels of market concentration can result in diminished competitive constraints on insurers,” AMA President Jack Resneck, Jr., MD, said in a statement. “Unchecked market power among insurers is a formula for higher premiums, lower coverage, and inadequate levels of patient care, concerns of great relevance to Medicare Advantage. Most large Medicare Advantage insurers are accused of fraud and flouting the authority of federal agencies. The new AMA study shines a light on the lack of competition in Medicare Advantage markets across the country and will help regulators and lawmakers better scrutinize anticompetitive insurer behavior that harms patients and physicians in an industry where exploitative business practices are already commonplace.”
The report noted that health insurance markets are mostly local, making a national overview not reflective of the degree of concentration that is relevant to consumers. For instance, the largest health insurers might have a small national share. UnitedHealth Group was the largest health insurer in Medicare Advantage in the report, with a national market share of 28% in 2021. That was followed by Humana (19%) and CVS Health (11%). In many cases, insurers had high concentrations in both MA and private healthcare coverage.
The 10 states with the least competitive Medicare Advantage markets were: 1. Vermont, 2. North Dakota, 3. Wyoming, 4. Montana, 5. Rhode Island, 6. South Dakota, 7. West Virginia, 8. District of Columbia, 9. Nebraska, and 10. Louisiana, according to the report.
The report noted that high concentration and low competition can result in lower quality care.
“...Health insurers are exercising market power in many parts of the country and, in turn, causing competitive harm to consumers and providers of care,” the report concluded.
See the full study here.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."