Even as private Medicare Advantage (MA) plans threaten to overtake the traditional fee-for-service (FFS) Medicare program in overall enrollment, the degree of competition and choice involved is mostly limited to the initial year of eligibility for Medicare. Despite a growing number of MA plan variations available in most counties, the MA market itself remains concentrated among a few insurers. Expanded choices for beneficiaries who choose MA instead of FFS all involve their getting more supplemental benefits in one form or another, rather than simply receiving the basic benefits of the traditional program more efficiently at lower costs.

These are features, not bugs, of recent policy, with strong political forces behind them. The market for other policy options remains limited.

Recent data analyses of Medicare plan switching are not fully comparable to the FFS versus MA choice in isolation. They tend to focus on annual switching in and out of Medicare coverage that is tied also to Part D drug coverage),  and the data trail runs a few years behind. However, some approximate findings indicate that, at most, 10 percent of enrollees in open seasons after year one switch from their initial coverage. Most of this involves voluntary switches from one MA-Part D combined plan to another one, while less than 1 percent of them switch to FFS and a separate Part D plan. Movement in later years from initial FFS enrollment to a MA plan is even more limited (less than 2 percent annually). Remaining, lower levels of annual plan switching is involuntary, either when an enrollee’s particular MA plan stops doing business or the enrollee’s income changes enough that it affects his or her automatic enrollment in certain MA plans providing low-income subsidies.

The choice between MA and FFS, and to a slightly lesser extent between MA plans, beyond year one, is far more hypothetical than real. (It may not drop quite to the level of the proverbial “one man, one vote, one time” critique once tossed loosely at the experience of a number of developing nations emerging from colonial rule decades ago.) Undoubtedly, inertia, choice complexity, and diminishing cognitive skills over time for aging beneficiaries all are factors in the stickiness of initial enrollment choices.

On the MA market concentration side, the continued dominance of UnitedHealthcare and Humana may partly reflect advantages of scale and substantial capital investments. But several Medicare program ground rules for risk adjustment and quality ratings also favor large incumbents and deter greater choice and competition.

Default enrollment into traditional Medicare at age 65 still helps prop up participation in the FFS program. Selecting a MA plan in year one requires more of an affirmative decision. On the other hand, the costs of risk-rating exposure for those considering later entry into Medigap supplemental coverage plans deters switches back out of MA into FFS. All but a handful of states permit Medigap insurers to consider their health status in such underwriting circumstances.

Federal government assistance in informing beneficiaries about their options certainly doesn’t help much, with most enrollees looking elsewhere than the offerings of Medicare.gov or State Health Insurance Programs.

Several hypothetical policy options might involve more randomized initial assignment between FFS and various MA plans at the start of a beneficiary’s initial year of eligibility (complemented by a parallel open season period of more informed switching options). Federal Medigap rules could be changed to require annual guaranteed issue access for enrollees continuously enrolled in MA plans, but wishing to re-enter the traditional program without paying an extra health status penalty to add private supplemental insurance.

Would this help jump start more plan switching and competition for annual Medicare plan enrollment? The administrative hurdles in designing and implementing more randomized first-year Medicare assignment would be significant. The politics of disruption are even more daunting. Perceived losers who miss out on their first choice would be far more vocal than passive winners. Any new default setting nudges are more likely to increase the MA share of overall enrollment, but dividing up the initial pie among MA insurers (such as by lowest cost plan, previous year’s market share, or even more randomly) would be equally challenging to implement. Revising Medigap risk rating rules for later entrants would upset the business plans of incumbent supplemental plan insurers. (It’s mildly ironic that only elderly Medigap purchasers remain “free” of Affordable Care Act-like portability protections.)

In practical political terms, the game is not worth the candle. Hence, the slower cumulative effects of each year’s Oklahoma land rush for first-year enrollees. In Part III ahead, I close with a few other policy options to increase choice and competition before calling it as mostly another Groundhog Day replay for would-be reformers.

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