Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Competition lacking in Medicare Advantage insurance markets, Commonwealth Fund reports, (Aug 28, 2015)

By Kathryn S. Beard, J.D.

In the vast majority of the United States, there is little-to-no competition in Medicare Advantage (MA) insurance markets. A new report from the Commonwealth Fund details the lack of significant competition among MA plans and reports considerably lower competition in rural counties than in urban ones. It also found that among the 100 counties with the greatest numbers of Medicare beneficiaries, 81 percent do not have competitive MA markets, and that in nearly two-thirds of those 100 counties, market power is concentrated among three nationwide insurance organizations.

MA program. The MA program, also known as Medicare Part C, is the managed care part of the Medicare program. Private companies contract with CMS to offer similar—or in some cases enhanced—Part A and Part B benefits to beneficiaries compared with traditional fee-for-service (FFS) Medicare benefits. MA plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), private FFS plans, special needs plans, and medical savings account plans. Allowing private insurers to participate in Medicare was intended to further two goals: (1) expand beneficiaries’ choices to include plans that can offer more-coordinated care and more-comprehensive benefits than those provided through traditional Medicare; and (2) take advantage of the presumed efficiencies of those plans.

MA plan market concentration. The study found that of the 2,933 counties in the United States with 10 or more Medicare beneficiaries enrolled in an MA plan, 97 percent—2,852 counties—meet the criterion for highly concentrated markets under the Herfindahl-Hirschman Index (HHI). These counties have 77 percent of total MA enrollment; they serve 84 percent of all Medicare beneficiaries nationwide. The criterion for moderately concentrated markets was met in 80 counties, representing 22 percent of MA enrollees and 15 percent of Medicare beneficiaries. Only one county met the criterion for a non-concentrated market—Riverside, California.

MA plan markets are highly concentrated in both urban and rural counties; the report found that although the average HHI score is well above the highly concentrated market criterion in urban counties, rural counties have even more highly concentrated MA plan markets.

Top 100. The report also studied the 100 counties with the largest number of Medicare beneficiaries, which represent 3 percent of all counties, but 47 percent of all MA plan enrollees. It found that although the 100 largest counties generally have a larger number of MA plans than smaller counties, 81 of them have HHI scores that indicate a highly concentrated market and low level of competition. Further, despite the 100 largest counties not being geographically concentrated, six major insurers dominate them in terms of number of beneficiaries enrolled. Across these counties, UnitedHealth is the dominant firm, with the largest number of MA plan enrollees in 38 counties; Blue Cross affiliates, including WellPoint, have the largest MA enrollment in 13 counties; and Humana has the largest enrollment in 12.

No findings on benefits of competition. The study cautioned, “the benefits of competition can be relied on only in markets where the elements of competition exist.” Therefore, its authors presented no opinion on whether expanding the role of private plans would improve Medicare’s ability to serve its beneficiaries, either in terms of the quality or cost of care.

Companies: The Commonwealth Fund

News: Antitrust