What Will The Trump Administration Do With Medicare Advantage?

The Trump Administration and Medicare Advantage: What’s at Stake?

The decisions made by the Trump administration regarding Medicare Advantage (MA) could have far-reaching consequences for millions of older adults and younger individuals with disabilities who depend on Medicare for their healthcare. The administration faces critical questions: Will it push more beneficiaries into MA plans, limit payments to insurance companies operating these plans, or pursue both? The outcomes of these decisions will significantly impact the quality of care, affordability, and accessibility of healthcare for vulnerable populations.

The Promise and Reality of Medicare Advantage

Medicare Advantage, a managed care model, was designed to improve the quality of care and reduce costs by providing insurance companies with financial incentives to deliver coordinated, patient-centered care. In theory, MA plans would reward preventive care, better health outcomes, and cost efficiency, unlike traditional Medicare, which often fragments care and rewards volume over value. However, the reality has been mixed. While some studies show improved outcomes for specific conditions, others reveal no significant benefits—and in some cases, worse results. Additionally, MA has not delivered the promised cost savings. In fact, Medicare spends more on MA than on traditional fee-for-service care for similar patients, partly due to aggressive "risk adjustment" practices that inflate payments for plans.

Mixed Signals from the Trump Administration

The Trump administration has sent conflicting messages about its intentions for Medicare. While President Trump has pledged to protect Medicare, his administration has also floated ideas about cutting "waste, fraud, and abuse" without defining what those terms mean. Meanwhile, his allies, such as Elon Musk, have called for significant cuts to federal entitlement programs, including Medicare. Dr. Mehmet Oz, Trump’s nominee to lead the Centers for Medicare and Medicaid Services (CMS), has expressed support for "Medicare Advantage for All," a proposal to automatically enroll all beneficiaries in MA unless they opt out. During his confirmation hearing, Oz acknowledged some of MA’s shortcomings, such as the frustration caused by prior authorization requirements, and hinted at cracking down on overpayments to insurance companies. However, the administration’s overall direction remains unclear.

Tough Choices Ahead

The financial stakes are high. The Medicare Payment Advisory Commission (MedPAC) estimates that Medicare pays MA plans about 20% more per patient than it spends on traditional Medicare, costing an extra $84 billion annually. While some of these payments fund additional benefits like dental and vision coverage, gym memberships, and low-cost drug plans—features that attract enrollees—others line the pockets of insurance company executives and shareholders. Cutting these payments could reduce costs but might also lead to reduced benefits, lower payments to healthcare providers, and limited access to care. This creates a delicate balance: tightening payments could discourage enrollment in MA plans, undermining the administration’s apparent support for the program.

The Path Forward

Despite the challenges, there are potential solutions. The Paragon Health Institute, a conservative think tank, has proposed changes to the MA payment model, such as reforming risk adjustment and capping payments in certain areas, which could save $250 billion over a decade while still promoting enrollment. These ideas suggest that it is possible to make MA more efficient and equitable without sacrificing quality. However, any changes will require careful consideration of the trade-offs involved. The administration and congressional Republicans seem likely to make changes to Medicare, but whether these changes will improve or impair the program remains to be seen.

Conclusion: A Critical Crossroads for Medicare

The Trump administration’s approach to Medicare Advantage represents a critical juncture for the program. Done well, reforms could enhance care quality, improve coordination, and control costs. Done poorly, they could push vulnerable populations into plans that prioritize profits over patient needs, exacerbating frustrations for both beneficiaries and providers. As the administration weighs its options, it must carefully balance the competing demands of cost control, access, and quality to ensure that Medicare continues to serve the needs of older adults and people with disabilities. The decisions made today will shape the future of healthcare for millions of Americans.