Many see competition in Medicare Advantage (MA) plan markets as necessary to keep premiums low, control spending, and expand benefits. With many health plans planning to consolidate, the Commonwealth Fund recently released a new brief examining how much competition exists in the MA plan market across the country.
According to the brief, 97 percent of MA plan markets in counties across the US “are highly concentrated and therefore lacking significant competition.” While rural areas have less competition than urban areas, in the 100 counties with the highest number of Medicare beneficiaries, 81 percent lack a competitive MA market. Nationwide, the plan market is centered on only three insurance companies in these 100 counties.
The Commonwealth Fund relied on the Herfindahl-Hirschman Index (HHI) to determine the level of concentration in individual markets by analyzing the number of MA insurance companies in a particular market and comparing that with the number of people enrolled. Markets with an HHI below 1,500 are considered nonconcentrated, those with an HHI between 1,500 and 2,500 are moderately concentrated, and markets above 2,500 are highly concentrated.
According to the findings, urban counties make up 95 percent of all MA enrollees and have an average HHI of 3,712 (highly concentrated) while rural counties have an average HHI of 5,245 (also highly concentrated). The national MA market has an average HHI of 3,783. While these results suggest that the MA market is not that competitive, it remains unclear what effect this has on Medicare costs and the quality of services offered.