Competition hard to come by in Medicare Advantage markets

Amid concern over the effects of major consolidation in the health insurance industry, a new report highlights the fact that most Medicare Advantage (MA) markets already are scarcely competitive.

There is little or no competition in MA insurance markets in 97 percent of U.S. counties, according to a new issue brief from the Commonwealth Fund. The report's authors used the Herfindahl-Hirschman Index, a standard measure of market concentration, as well as the most recently available data on MA plan enrollment, to arrive at their findings.

Only one county nationwide--Riverside, California--qualified as a competitive market, the report notes, and only 80 counties qualified as moderately competitive.

Competition also was difficult to come by in the 100 counties with the most MA beneficiaries, as these markets were dominated by six major insurers, including UnitedHealth, Blue Cross and Humana. Rural markets were also less likely to be competitive than urban ones, the report notes.

The report comes amid increasing worries--especially among provider groups--that the impending Aetna-Humana and Anthem-Cigna mergers will decrease competition in the industry. Humana, in particular, commands considerable market power in the MA space. Even so, an Aetna-Humana combined company would still control only 8 percent of the Medicare market, Aetna CEO Mark Bertolini has said. 

"It certainly seems like [the mergers] threaten to reduce the amount of competition in each market, but our point is, there's relatively little competition to begin with," one of the study authors, Stuart Guterman (pictured right) told FierceHealthPayer in an exclusive interview.

On the other hand, he says, greater market power in the hands of health insurers "tends to enable them to bargain down the prices of providers." The question, though, is whether that leads to benefits for consumers in terms of lower premiums.

The report's findings may seem to contrast those from a recent Avalere analysis, which reported that the average MA beneficiary had a choice of more than 18 plans in 2015. Yet the two reports may not actually be that contradictory, Guterman points out.

While the Avalere analysis measured the number of plans available to MA beneficiaries in various parts of the country, the Commonwealth Fund report instead examined the concentration of plan enrollment in any given area, he says. Even if consumers have a large number of small and large insurers to choose from, the market still tends to be dominated by just a handful of major players.

 "There are a lot of choices, but when you're talking about competition, you're really talking about market power," Guterman says.

The MA program, which contrary to some predictions has grown considerably in the post-Affordable Care Act era, has drawn praise for its ability to engage both payers and providers in coordinated, value-based care.

Yet the Commonwealth Fund report raises questions about the "the calls for pushing Medicare much more toward being determined by competition among private plans," Guterman notes.

"If we're going to bring the best out of both public and private options available to Medicare beneficiaries, we need to go beyond just assuming that the word 'competition' is a magic word," he says. "Because competition really doesn't exist much in the insurance market, either in Medicare or the private sector."

To learn more:
- here's the report

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