State of the 2014 Medicare Advantage industry

The Centers for Medicare and Medicaid Services (CMS) requires all Medicare Advantage organizations (MAOs) to submit a bid by the first Monday in June that estimates the cost to provide traditional Medicare benefits to an “average risk” Medicare beneficiary for the coming year. A portion of any savings generated by the MAO (the savings defined as the difference between the bid and the benchmark rate) is returned to the plan as a rebate, which can be used by the plans to provide benefits above and beyond traditional Medicare.

As MAOs prepare to submit these bids each year, they must take into account historical costs, CMS revenue levels, anticipated market changes, and membership characteristics, which all impact how a plan’s costs and benefits will change in the coming year. As the Medicare Advantage (MA) market continues to evolve through the Patient Protection and Affordable Care Act (ACA), it is important to analyze how the landscape of this program is changing in the coming year.

This report highlights key changes in beneficiary premiums and benefits for the 2014 MA market and aims to assist MAOs in making strategic decisions during 2015 bid preparations.