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December 27, 2023
David Burda
Economics Policy System Dynamics

Medicare Advantage Is a Burst Pipe

If you live in the Upper Plains, Midwest or Northeast, you worry about frozen pipes during the winter. That’s when water inside a pipe freezes, expands and cracks the pipe wide open to gush out until you notice it pouring from your ceiling or into your semi-finished basement.

In my neighborhood, you know whose pipes burst when you see big pieces of torn-up carpet on the curb waiting for the garbage truck. Many plumbers make a comfortable living fixing or replacing frozen pipes in the winter.

The image of water gushing uncontrollably from a burst pipe in the winter came to mind when I looked up the latest national health expenditure figures for Medicare Advantage (MA) plans. Formerly referred to as Medicare Part C, these are the Medicare HMOs run by commercial health plans under contract with the federal government. Most MA plans also include a Medicare Part D prescription drug benefit.

As you know, MA plans are wildly popular with seniors because most MA plans offer low or no monthly premiums or annual deductibles. You also may know, if you’re a regular reader of the 4sight Health blog, MA plans quickly are consuming the annual Medicare budget because their commercial owners have an insatiable appetite for revenue and profits. The money flowing from Medicare into Medicare Advantage is like water gushing out of a frozen pipe.

Here are the latest numbers from CMS, which released its annual national health expenditure figures on Dec. 13, 2023.

Federal spending on MA rose 15.1% in 2022 to about $468.7 billion. Total Medicare spending rose 5.9% to about $944.3 billion. So, spending on MA rose more than twice as fast as overall Medicare spending last year. MA spending represented 49.6% of all Medicare spending in 2022, up from 45.7% in 2021.

MA spending also grew nearly twice as fast as MA enrollment in 2022. Enrollment in MA plans rose 8.5% to about 29.2 million seniors. If you do the math like I did, and you should check it, MA expenditures per enrollee last year rose 6.1% to $16,059.28 from $15,136.72. Not only is the government spending more, but it’s also spending more per MA enrollee.

MA spending also grew nearly four times faster than total national health expenditures. Total NHE rose 4.1% to $4.5 trillion last year, according to CMS.

The 15.1% jump in MA spending last year follows:

  • An 11.5% increase in 2021 (revised downward by CMS from 14.1%).
  • A 15.6% increase in 2020.
  • A 15.2% increase in 2019.
  • A 12.6% increase in 2018.
  • A 10.1% increase in 2017.

Any way you cut the numbers, what CMS reported this month is the definition of uncontrolled federal spending thanks to the privatization of a historic government program and greedy private government contractors. MA spending is like uncontrolled water gushing out of a frozen pipe in the winter.

The only way to stop the uncontrollable flow of water out of a burst pipe is to shut off the water to the entire house until you can repair the broken pipe. The smart thing to do is stop it from happening in the first place with effective prevention.

Thanks for reading.

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About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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