By Cynthia Henry, Director of Population Health Informatics, ZeOmega
LinkedIn: Cynthia Henry, PMP
LinkedIn: ZeOmega
As the healthcare industry adapts to economic and regulatory changes, Medicare Advantage (MA) stands out as a cost-effective model consistently delivering value to beneficiaries. Compared to traditional fee-for-service (FFS) Medicare, MA excels in financial efficiency and quality outcomes, making it a resilient choice for enrollees and a strategic asset for payers. Despite recent decisions by some health plans to exit specific markets, MA remains positioned for growth. These exits represent strategic moves rather than fundamental issues within the MA program. Recent adjustments by the Centers for Medicare & Medicaid Services (CMS) in the 2025 Star Ratings further reflect an evolving regulatory landscape, and this recalibration should not be mistaken for a decline in MA quality.
Cost-Efficiency and Quality Outcomes Make MA an Attractive Option
MA plans outperform traditional Medicare FFS through value-based care strategies emphasizing quality outcomes and cost control. The capitated payment model in MA incentivizes proactive health management, reducing emergency and inpatient services. A 2024 Better Medicare Alliance analysis confirmed lower hospitalization and readmission rates for MA beneficiaries compared to FFS, underscoring MA’s focus on preventive care, chronic disease management, and other cost-controlling practices.
In addition to cost savings, the flexibility within the MA structure allows plans to offer supplemental benefits, such as dental, vision, and transportation services that traditional Medicare doesn’t cover. This comprehensive approach addresses broader health needs, enhancing overall well-being. Such flexibility in benefit design has driven MA’s growing appeal to Medicare-eligible individuals, with enrollment rising steadily. An Urban Institute report from 2024 highlights these financial efficiencies, reinforcing MA’s strength in a value-based care era.
Shifts Reflect Market Positioning, Not Systemic Issues
Recent payer exits from select MA markets have raised concerns about MA’s stability, yet these moves reflect individual strategies rather than systemic challenges. In 2024, several major insurers scaled back their MA presence in certain areas, citing local market dynamics and low margins. Such exits are often driven by competitive pressures and local regulatory conditions as insurers optimize market presence and profitability.
For example, Humana withdrew from select rural and low-population regions, noting inefficiencies and difficulty achieving economies of scale. These decisions align with the MA model’s inherent flexibility, allowing payers to tailor market presence to strategic goals. This flexibility has long enabled payers to focus on markets where they can deliver value and sustain profitability, underscoring MA’s adaptability.
2025 Star Ratings Reflect Recalibration, Not Quality Decline
In October 2024, CMS released the 2025 MA Star Ratings, showing an expected decrease in average ratings. This reflects CMS’s recalibration of the ratings system rather than a drop in MA quality. CMS aimed to address “metric inflation” within Star Ratings by refining the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey scoring, applying stricter standards for high ratings. According to CMS, these changes create a more accurate distribution of quality across MA plans, encouraging improvement and competition.
The National Committee for Quality Assurance (NCQA) observed that while these adjustments may reduce ratings short-term, they align with CMS’s broader strategy to incentivize quality in a competitive landscape. Beneficiary satisfaction and retention remain robust, indicating MA’s resilience despite rating adjustments. This consistency speaks of the program’s strong quality metrics and adaptability.
Future Growth of Medicare Advantage
Despite selective market exits and rating recalibrations, MA is expected to continue its growth. An aging population and interest in MA’s integrated care model are key drivers. The Congressional Budget Office projects MA enrollment to reach new highs in 2025, as more Medicare-eligible individuals select MA for its added benefits and coordinated care approach. This demand highlights the program’s appeal and suggests it will thrive as regulatory and market forces evolve.
Federal support for MA is likely to persist due to its proven ability to deliver Medicare savings while maintaining or improving care quality. As CMS refines the program’s regulatory framework and champions value-based care, MA serves as a model for balancing cost, quality, and beneficiary satisfaction. This alignment with policy goals reinforces MA’s stability and growth prospects, even as the landscape changes in response to regulations and market forces. Furthermore, the incoming Trump administration’s policy plan includes making MA the default choice for new beneficiaries, which will funnel growth away from traditional Medicare.
Medicare Advantage’s proven performance, cost efficiency, and structural adaptability position it as a resilient choice in today’s healthcare environment. Recent payer exits from specific markets reflect strategic adjustments rather than MA instability, while Star Ratings recalibrations reflect CMS’s oversight evolution, not a quality downturn. Looking ahead, MA’s emphasis on value-based care, beneficiary satisfaction, and financial sustainability indicates a future of continued growth, supporting high-quality care for millions of Americans.