Medicare Advantage is expected to be the line of business that brings payers the most profit in 2026, but they should be prepared for significant changes and challenges, according to the insights from the McKinsey report.
For example, CMS has predicted the Medicare trust fund will run dry in 2031.1 Meanwhile MA market penetration in the US is inconsistent, and program regulations, demographics and member preferences are changing.2
Medicare beneficiaries are trending older, and those aged 85 and older have more than twice the monthly medical costs, on average, of those between 65 and 69. The report notes lower premiums or fewer core benefits may not be ideal for these members, and payers may need to steer them to plans that best address their needs as they age.
They also need to make improvements in care management, social determinants of health and health equity, and potentially design intensive, home-based care models as member mobility declines, the report advises.
Another challenge is a slowing in MA membership growth. McKinsey predicts annual growth in membership will slow from more than 8% in 2022 to about 3% in 2031.2 As a result, payers could benefit from shifting focus to areas of lower market penetration, including heavily rural populations or those with lower socioeconomic status. New offerings such as virtual care may enhance appeal to members who traditionally have not enrolled in MA.
Finally, the program is set to see major regulatory changes take effect in the next three years for rates, risk adjustment, Star ratings and the Part D program.2
Standing out in the market
Payers that embrace technology in their offerings and interactions with members will be better able to compete. McKinsey data shows more than two-thirds of members reported using technology during onboarding to understand coverage, manage prescription drugs and review provider networks.2
Payers should deliver a high-quality, omnichannel experience. They should expand digital engagement to address shifting member preferences, invest in automation that improves efficiency, and explore integration for seamless customer experience, the report says.
It also recommends:
- Personalizing engagement by using unique member identifiers to track them across touchpoints and using AI to create personalized outreach and interventions.
- Reinvesting in core benefits that have the greatest impact on member health and ensuring members are in the right plan for their needs.
- Tailoring offerings by geographic area, such as virtual care in rural areas.
- Using advanced analytics to match members with the most relevant care models.
- Making targeted investments in the Stars program that address SDoH, close care gaps and improve outcomes for older members with different care needs.
The report notes strategies that were successful over the past five years may no longer be enough, and making “transformational moves” in the near future will help payers better compete in the new landscape. Some payers are already making these types of moves by buying primary care centers with patients in MA plans.
“Success in the future will be determined by bold moves made now,” the authors advise, and plans that boost efficiency, offer an optimized, omnichannel experience and design benefits that meet the needs of an aging demographic will be better equipped to provide the best care in a shifting landscape.
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References
- 2023 Annual report of the boards of trustees of the federal hospital insurance and federal supplementary medical insurance trust funds. CMS. March 31, 2023. https://www.cms.gov/oact/tr/2023
- Isaacson, G., Jamieson, D., Pedersen-Green, S., et al. Sweeping changes to Medicare Advantage: How payers could respond. July 11, 2023. https://www.mckinsey.com/industries/healthcare/our-insights/sweeping-changes-to-medicare-advantage-how-payers-could-respond
