Health systems and other provider organizations represent a majority of the new participants in the Medicare Advantage program, according to a new study from consulting firm Avalere Health. The paper serves as another talking point for a certain large insurer under the government's antitrust lens right now.
That company happens to be Aetna, which funded the Avalere study released Tuesday, as well as a separate Medicare Advantage study that Avalere released in September—right before Aetna CEO Mark Bertolini appeared before Congress. Avalere said it had full control of the content of both studies, and the data were based on CMS reports. But it's likely no coincidence that Aetna is backing research that reinforces one of its arguments in favor of its $37 billion Humana acquisition.
Last September, Congress grilled the CEOs of Aetna and Anthem about how their proposed transactions could alter healthcare's competitive landscape. Bertolini did not mince words, saying the Humana play was an attempt to bolster its Medicare Advantage business. The combination of Aetna and Humana would result in 4.5 million Advantage members. The U.S. Justice Department and state insurance officials are reviewing Aetna's deal, as well as Anthem's transaction for Cigna Corp.
Hospitals and consumer groups have argued if Aetna were permitted to buy Humana, the combination would lessen competition in Medicare Advantage and lead to higher costs. But Bertolini told members of Congress that many hospital systems are entering the Advantage market, which is forcing insurers to stay competitive on prices and products. He also said beneficiaries could always switch from Advantage to traditional Medicare.
The Avalere study shows that, indeed, providers represented almost 60% of the new Medicare Advantage organizations in 2016. The growth of provider-based Advantage plans has been most pronounced in the past decade, according to the study.
Hospitals and health systems have undoubtedly raced to start their own Medicare Advantage products. Providers, especially those that have tinkered with Medicare's accountable care organizations, have become emboldened to take more risk. Becoming a Medicare Advantage insurer offers providers the biggest risk and potentially a bigger financial reward.
But the latest Avalere study also shows that provider-based plans are still really small players so far in Medicare Advantage. The top 10 provider-based insurers by enrollment represent only 12% of Medicare Advantage's nearly 18 million members—and most of those are enrolled in the dominant Kaiser Permanente system. Aetna and Humana, meanwhile, control a quarter of Medicare Advantage membership.
Avalere President Dan Mendelson said he didn't know exactly why Aetna, or any other client, may fund a study. But he said the study shows that insurers are at least interested in how more providers are gravitating to new financing models.
“From my perspective, there's very strong health plan interest in how providers are engaging in risk,” Mendelson said.
The rhetoric over the health insurance mergers has only intensified since the calendar flipped to 2016. Last week, the left-leaning Center for American Progress issued a report that said the Aetna deal would undermine health insurance competition and raise premiums for seniors. “At best, the effects of the merger would be highly uncertain for consumers and the broader healthcare system,” CAP's report said.
Aetna, however, has called the paper “deeply flawed.” Aetna did not immediately respond to questions about why it funded Avalere's study.