Just the Facts: Findings, No Fluff

There are few issues more complex and personal than health care. This is what makes health care reform so tricky and politically nuanced. When windows for reform open, policymakers get bombarded with academic research, think tank analyses, and views from stakeholders. With only so many hours in the day, and often limited resources or bandwidth, a decision-maker can be put in the unenviable position of trying to sift through the incoming information without a strong, unbiased foundation upon which to make a policy decision.  

After hearing about this reality directly from Congressional staff (and for some of us, living it), The Tobin Center began to publish literature reviews for interested parties on key areas of policy debate. Now formalized within the Health Care Affordability Lab at Yale, these publications provide clear, concise syntheses of the most robust research on a given policy topic. These memos will not include specific policy recommendations (please check out the 1% Steps for Health Care Reform for those ideas!); instead, readers will come away with Just the Facts.

For those interested in the findings of the best, rigorous research on timely health care questions, these memos are a reliable resource. Facts from each memo are sourced from research published by leading scholars–research that uses the most advanced empirical methods. Rather than advancing an agenda, these memos aim to clarify where the evidence points and where uncertainty remains. All references are explicitly cited, and the authors themselves may be available for additional follow-up. You can find all of our Just the Facts memos here on our website.

Just the Facts on Medicare Advantage

Our latest memo addresses one of the biggest - and most timely - questions in federal health policy: Does Medicare Advantage (MA) lower health care spending, lower federal spending, and benefit Medicare beneficiaries? 

With a growing enrollment, regular rulemaking activity from the Administration, and everpresent interest in federal Medicare growth and spending, this memo consolidates the findings of several top scholars and their published work into a digestible resource for those seeking to understand more about the program.

Assessing Medicare Advantage (MA) relative to traditional Medicare (TM) is challenging because of what economists refer to as selection issues. That is, Medicare enrollees can choose whether to enroll in MA or TM, and can also choose to switch their enrollment. Rather than synthesizing all studies that have assessed the MA program, we focus on the results of a handful that have taken the most empirically rigorous approach to studying the program over the last twenty-five years. Importantly, these papers account for the fact that patients can choose whether to enroll in an MA plan or the TM program - an essential variable to address in an accurate evaluation.  

Medicare Advantage now serves over half of eligible Medicare beneficiaries. The evidence shows it can reduce health care utilization and, in some plan types and markets, improve patient outcomes. The current MA structure is also a cost driver within the Medicare entitlement — driven by generous subsidies, inadequate risk adjustment, and coding practices that inflate payments without definitively improving care.

In reviewing this empirically rigorous subset of evidence, we identify four key findings:

1. Medicare Advantage plans - and, in particular, MA HMO plans - spend less per person than traditional Medicare, after controlling for favorable selection.  
2. Despite lower overall health spending, Medicare Advantage plans cost the federal government more money than if enrollees had enrolled in traditional Medicare. This higher spending results from the plans offering more generous benefits and enrolling beneficiaries who are healthier than their risk coding suggests. 
3. In Medicare Advantage, more insurer competition means more savings and benefits get passed to enrollees.
4. There is extensive variation in mortality across Medicare Advantage plans. 

To unpack these findings, read the full Just the Facts Memo here.