In 2023, over half of Medicare beneficiaries were enrolled in Medicare Advantage (MA), costing the federal government over $350M in payments to MA plans. Passing the 50% threshold has put a spotlight on potentially excessive payments to these MA plans. However, these concerns are not a new phenomenon. The Affordable Care Act (ACA) made major changes to MA payments in response to growing concerns about the overpayment of MA plans. The first major change was benchmark changes that cut base payments. The second major change was the implementation of a Quality Bonus Program (QBP) to encourage MA plans to compete for enrollees on plan quality. The QBP was added by Congress in part to ameliorate concerns about the impact of the benchmark cuts on benefits and plan quality. The CBO predicted that MA penetration would stagnate or decrease following the ACA, but enrollment followed, if not accelerated faster than, pre-ACA trends.
Both policy changes have been studied independently; however, this is the first study that attempts to combine the two concurrent policy changes into one analysis to decompose the effects and disentangle any countervailing effects. Descriptive work has also highlighted concerning racial and socioeconomic disparities, especially in high quality MA plans, and this study delves further into these disparities. This project aims to understand the implications of implementing multiple policy changes for disparate reasons and how the changes might interact with each other, particularly when both policies are achieved through financial mechanisms.
Using public Medicare data from 2008-2019, I employ a difference-in-differences design to examine the effects of the benchmark changes and QBP on the MA market, utilizing county- and plan-level variation in the benchmark changes and QBP payments. Preliminary results suggest that the QBP payments had the most impact on enrollment during the first few years of the post-ACA period (2012-2014), which corresponds to years when the QBP was under a demonstration program that expanded the eligibility for bonus payments and when MA plans were responding to the new payment policies. Future work will study plan characteristics, access, and distributional concerns. I am also developing a structural model to study counterfactual benchmark and QBP policies.
Studying the important tradeoffs that policymakers face between promoting access, funding additional Medicare benefits, and curbing government expenditures will inform current debates on the future of the MA program and payment policy changes.
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