Medicare Advantage plans are popular. They’re estimated to have enrolled more than half of Medicare beneficiaries for the first time in 2024.

But changes are underway. Those enrolled in Advantage plans or considering them need to pay careful attention when evaluating plans in this fall’s open enrollment season. There could be significant modifications to existing Advantage plans.

Medicare Advantage plans are popular because for relatively healthy beneficiaries out-of-pocket costs usually are lower than for a package of original Medicare coupled with Medicare supplement insurance and Part D prescription drug insurance. Advantage plans also offer benefits not available in original Medicare.

Advantage plans also are popular with insurers offering them, because they’ve been profitable.

But Medicare continues to consume a higher percentage of federal government spending each year and government policymakers continue to revise the program to reduce spending on Medicare, especially Medicare Advantage plans.

Reduced payments to Medicare Advantage sponsors are likely to cause changes in the plans in 2025, such as higher premiums, copayments, and deductibles as well as reduced coverage.

We’re in the second year of a three-year period in which the Centers for Medicare and Medicaid (CMS) is reducing Medicare spending with special attention directed at lowering Medicare Advantage spending, the CEO of UnitedHealth warned in a recent earnings call.

Another warning came from CVS Health, which owns and operates Aetna Medicare Advantage plans. CVS recently announced that its first quarter earnings were below expectations and 2024’s earnings would be lower than the estimate it issued three months earlier.

CVS aggressively marketed its Medicare Advantage business for 2024, enrolling about 200,000 more members than it expected. It also purchased a medical clinic business directed at seniors and a home health care company that caters primarily to Medicare beneficiaries.

Another warning was issued earlier this year by Humana, which said its Medicare Advantage business wasn’t doing as well as expected.

Both CVS and Humans said it would take at least a couple of years to restore profit margins in their Medicare Advantage plans.

As the companies were expanding their Medicare Advantage businesses, government regulators began planning to reduce payments to insurers. Medicare officials recently announced that Advantage plan reimbursements in 2025 will be less than insurers were expecting.

In addition, members’ use of medical services increased beyond the companies’ estimates.

CVS said its members made higher use of outpatient services during the first quarter and also had more inpatient hospital admissions. The company indicated it believes more than half the excess expenses were specific to the first quarter and not likely to be repeated.

Medicare officials also are making tweaks in what the program covers that aren’t widely announced.

For example, the program recently said that in most cases it no longer will pay for blood tests that can detect early signs an organ transplant is being rejected by the patient’s body. Instead, patients have to wait until there are enough symptoms to warrant a biopsy, according to recent editorials in The Wall Street Journal.

Expect more coverage reductions like this in both original Medicare and Medicare Advantage.

During open enrollment this fall, Medicare Advantage members should closely scrutinize information from their current plans with details of changes for 2025.

They also should develop backup plans in case the 2025 changes make the plan unattractive. A backup plan could include switching to original Medicare and adding Medicare supplement and Part D prescription drug policies. Another alternative is to review the terms of other Medicare Advantage plans offered in the area.

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