Challenges in Medicare Advantage Plans

Edward Daly, at 81, had always viewed the Medicare Advantage options from Blue Cross Blue Shield as reasonably priced. However, he recently noticed a significant increase in his premiums—almost 25%, jumping from $87 to $108 a month. On top of that, all Medicare enrollees will also face a $185 monthly premium in 2025.

Moreover, some benefits in Daly’s plan, like dental insurance coverage, have been reduced or eliminated entirely.

Having served as the general counsel for Blue Cross until 1995, Daly is now reconsidering his perspective due to these rapid changes. Interestingly, he discovered that other Medicare Advantage plans featured even steeper premiums.

“Everything has gone up significantly,” Daly remarked.

Point32Health, the parent company overseeing Harvard Pilgrim and Tufts Health Plan, is making some substantial adjustments. They plan to phase out their $0 Preferred Provider Network (PPO) Plan, which historically offered greater doctor choice, and merge two premium-free HMO plans into a single option for 2026. Similarly, Blue Cross Blue Shield has scrapped its $0 premium plan and replaced it with one costing $56 per month.

These financial shifts are impacting patient care as well. Notably, both Blue Cross and UnitedHealthcare have removed primary care doctors from Massachusetts General Brigham’s network, forcing patients to seek new doctors, potentially switch insurance, and face higher co-pays.

Additionally, Blue Cross has excluded primary care physicians from Beth Israel Lahey Health in its Medicare Advantage PPO plans. Neither the insurer nor the healthcare system has provided an explanation for this, but analysts suggest that financial reasons played a significant role.

“These changes reflect ongoing tensions between insurers and healthcare providers as each tries to balance costs,” said Alan Sager, a Boston University health law and policy professor.

As of 2021, Blue Cross Blue Shield of Massachusetts generated $3.6 million from Medicare Advantage plans. However, last year, the company reported a loss of $113 million from these plans and anticipates a $185 million loss this year.

“The entire industry is going through these disruptions,” noted Krista Bowers, a senior vice president at Blue Cross.

Some insurers still active in Massachusetts claim to be providing more options for Medicare Advantage participants. For instance, Blue Cross announced it will present three PPO plans and four HMO plans for the coming year, while UnitedHealthcare promises similar offerings will reach nearly all Medicare Advantage members by 2026.

Yet, predictions suggest the number of Medicare Advantage enrollees may decline next year, dropping from 34.9 million in 2025 to around 34 million—the first decrease in recent history. The Centers for Medicare and Medicaid Services also indicates that the share of Medicare patients in Advantage plans will shrink from 50% to 48% in 2025.

Open enrollment is set for October 15th to December 7th, but the future of Medicare Advantage remains uncertain.

Created in 1997, Medicare Advantage, originally named Medicare + Choice, gained popularity because it bundled medical and drug coverage and included extras like dental, vision, and fitness benefits—often at little to no cost for premiums.

Insurers previously profited by receiving a fixed payment from Medicare for each enrollee, managing to keep average medical costs below the reimbursement rates. However, the rising costs of medical services and pharmaceuticals pose growing challenges. The demand for injectable cancer treatments, which have turned cancer into a manageable condition rather than a terminal one, especially burdens insurers.

“The earnings and the way Medicare reimburses for oncology haven’t really kept pace with what we observe in the population,” said Bowers.

Also, recent changes to Medicare Advantage payment models could be complicating matters. The Inflation Reduction Act aimed to lower drug prices for Medicare users and altered how risk influences revenue for certain plans. The federal government used to consider multiple diagnoses to determine a patient’s health status, adjusting monthly payments accordingly. Now, some diagnoses contributing to risk scores have been eliminated, which has resulted in decreased payments.

Additionally, the Trump administration plans to boost federal payments to Medicare Advantage insurers by about $25 billion next year, which is roughly a 5% increase.

Nonetheless, healthcare costs continue escalating much faster than that increase. For example, health spending in Massachusetts rose by nearly 9% in 2023, the most recent data available.

As profits dwindle, insurers are reducing their Medicare Advantage presence. Cigna, for example, exited the sector this year after selling its Medicare Advantage division.

At least six other insurers, including Blue Cross Blue Shield Vermont, are planning to withdraw from the Medicare Advantage market next year. The previous year, WellCare Medicare Advantage, a subsidiary of Centene, also left Massachusetts, leaving thousands of patients to navigate new options.

As the Medicare Advantage landscape contracts, it may become increasingly challenging for national insurers to operate successfully in this space, according to Michael Barnett, a Brown University health policy professor.

“In the end, this means the costs of healthcare keep climbing steadily,” Barnett said. “That’s been a persistent issue in Massachusetts for quite some time.”