Medicare Advantage at a Crossroads: Incentives, Access, and the Future of Care
Image Credit: Sasirin Pamai
Medicare Advantage (MA), also known as Part C, has become the dominant path through which older adults receive Medicare coverage. More than half of all beneficiaries — roughly 33–34 million people — are enrolled in plans operated by private insurers. These plans promise convenience and financial protection, including caps on out‑of‑pocket spending and some extra benefits not found in Original Medicare.
At the same time, MA brings challenges that stem directly from how the program is designed: plans are paid a set amount per enrollee each month, and they must manage costs and risk. This is often done by narrowing networks, requiring prior authorization, or reducing benefits when costs rise. These structural incentives can affect access to timely care, especially for people with complex health needs or limited provider options.
Medicare Advantage Enrollment as a share of the eligible Medicare population. Source: KFF
What Medicare Advantage Is — And How It Differs from Original Medicare
Medicare Advantage replaces the traditional system, in which the federal government reimburses providers for each service, with a prepaid model. Each month, MA insurers receive a fixed payment for every member, also known as a “per member/per month” (pm/pm) or capitated payment model. Because the insurer is responsible for all costs, even if they exceed the pm/pm received, they are financially incentivized to take a more active role in determining when, where, and how care is delivered compared to the standard Medicare model.
Table 1: Comparison of Original Medicare and Medicare Advantage
A shift in structure introduces trade-offs. MA plans often offer broader benefits and lower upfront premium costs to attract customers, but come with higher insurer involvement in medical decisions and greater variation in access from community to community.
A System Increasingly Built Around Private Plans
The growth of MA has fundamentally changed the landscape of Medicare. The Centers for Medicare & Medicaid Services’ (CMS) 2025 Rate Announcement continues the trend of increasing federal payments to MA plans, and adds refinements regarding how plans report enrollee diagnoses. These payment adjustments reflect policymakers’ efforts to better match funding to patient risk, while also controlling overspending. But the combination of a capitation payment system and for-profit insurance business models means that MA plans can more closely resemble private health insurance than traditional Medicare in a few critical ways.
How Prior Authorization and Provider Networks Shape Access
Prior authorization (aka the requirement to get insurer approval before a service is covered) is a hallmark of private commercial health insurance. It is also a key aspect of Medicare Advantage. In a prepaid system, insurers use authorization to verify that a service is necessary and fits clinical guidelines.
Done well, this can reduce duplication and avoid harmful procedures. But delays can also be harmful. A needed MRI or ultrasound that takes weeks to approve can extend pain, postpone diagnosis, or slow recovery. A 2022 federal review found cases in which requests that would normally meet Medicare coverage rules were denied by MA insurers. This, of course, raises concerns about whether the balancing act between ensuring timeliness and appropriateness of care vs. reducing unnecessary costs always (or even predominantly) errs on the side of patient wellbeing.
Provider network design works similarly: MA plans create smaller networks of providers than Original Medicare, partly to simplify negotiating discounts and coordinating care. For MA enrollees in cities, these constraints on their choice of provider may not feel restrictive. For those in rural regions, where there may be only one hospital or a handful of specialists, even one provider or facility leaving the network can radically reshape a person’s access to needed or even life-saving care.
The Economics Behind the Change
To understand why these challenges have emerged, it helps to look at the incentives at the heart of Medicare Advantage. Because MA plans are paid a fixed amount per person each month, they benefit when they are able to keep costs lower than payments. Conversely, they stand to lose (often significantly) when care becomes more expensive.
This incentive structure can encourage efficient care, but it can also push decisions toward cost control at the expense of care provision. When hospitals or doctors require higher reimbursement, plans may narrow networks. When care needs rise in a particular market – for example, where the population is aging rapidly — plans may reduce extra benefits or exit certain counties.
These are not isolated business decisions; they are the direct result of a public program serving a higher-needs population being delivered through private, profit‑driven companies. Maintaining a system that balances the benefits more evenly relies on insurer competition. In communities with only a few providers or plans, adversely, that competition can be limited.
This means that where an individual lives can profoundly affect not only which plans are available, but how well they work.
Providers Under Strain, and Why It Matters
Providers serving older, high‑need populations often operate on thin margins. Research shows that hospitals receive 5.6% less per admission on average from Medicare Advantage than hospitals enrolled in Original Medicare. And at the physician level, MA reimburses a typical mid-level office visit at about 96.9% of the traditional Medicare rate.
By contrast, private, non-medicare, commercial insurers pay about 189% of the Medicare rate, and reimburse physicians ~143% of Medicare for the same services. These differences translate into large revenue gaps across thousands of visits. This difference in rates creates impacts that are felt well beyond the Medicare population. When reimbursements are lower, hospitals have fewer resources to maintain specialty services, retain staff, or fund improvements that benefit their entire service population. Meanwhile, staff filing MA claims must spend additional time dealing with authorization requests and appeals — work that does not occur in the same way for Original Medicare.
All of this can contribute to facilities and providers making the hard decision not to stay in network with MA plans. And when hospitals leave a network, or close entire units due to reimbursement shortfalls — patients are impacted. Many recipients (including those with commercial non-Medicare insurance plans) may have to travel farther, wait longer, or pay more out of pocket. These changes are not just inconvenient. They can reduce continuity of care, disrupt long‑standing provider relationships, and add unnecessary stress during already vulnerable moments.
Choice on the Chopping Block
Health insurers regularly adjust where they offer plans based on cost expectations, regulatory changes, and competition. This can mean a plan that looks stable today may scale back next year — limiting patient choice, especially in less populated counties.
One of the core promises of the MA model is choice. But choice depends on maintaining an adequate network of both providers and plans. As the MA program grows, sustainability requires balancing these relationships and ensuring the system works outside of urban centers with abundant hospitals and specialists.
Unfortunately, a perfect storm of unsustainability is brewing on the horizon. The pool of MA insurers is already low, with only two parent companies providing nearly half of all plans. Meanwhile, the number of MA enrollees is steadily increasing, as is the percentage of enrollees with more intensive (and expensive) special needs plans (SNPs), and insurers are seeing a reduction in the profitability of their MA plans due to the increasing costs of meeting the often complex care needs of the growing Medicare population. As a result, many are starting to reduce non-required services, pull out of less-profitable networks or entire states, or even get out of MA altogether. And on the provider side, more and more hospitals and other health systems are dropping out of Medicare Advantage.
What This Means for People Who Rely on Medicare Advantage
For enrollees, most of these dynamics are often invisible until they need care. Keeping the right plan requires awareness of how these structures operate. Before renewing or switching:
Check that your doctor(s) and hospital(s) are still in‑network for next year.
If you take regular medications or expect procedures, ask how prior authorization works and how long approval normally takes.
Review the annual out‑of‑pocket limit and drug coverage terms. Even $0‑premium plans can lead to cost differences later.
Medicare Advantage Policy Perspective: What to Look for in 2025-2026
Federal agencies and lawmakers are focused on keeping access reliable as MA continues to grow. Key policy changes for 2025–2026 include:
New federal rules that require faster, electronic prior‑authorization decisions.
Payment and Star Ratings refinements designed to align spending with patient needs and reduce oversight variation.
Concerns about reduced support for people with low incomes, including delays in improving the Medicare Savings Program.
Each of these changes reflects an effort to keep the MA system accountable while acknowledging that it is now the majority delivery model for Medicare. What the future will bring is anyone’s guess, but for now, Medicare Advantage is here to stay. So it remains vital for new and continuing enrollees alike to carefully review all details of the plans they are considering, stay informed on relevant changes in rules and policies, and balance premium any costs or savings against depth of network coverage, available services, customer reviews, and plan ratings to ensure they’re making the right choice for both their current and longer-term healthcare needs.
References
CMS 2025 MA & Part D Rate Announcement: https://www.cms.gov/newsroom/fact-sheets/2025-medicare-advantage-and-part-d-rate-announcement
Interoperability & Prior Authorization Final Rule: https://www.cms.gov/priorities/interoperability
WISeR Model (Pilot in Original Medicare): https://www.cms.gov/priorities/innovation/innovation-models/wiser
KFF: Medicare Advantage Enrollment Trends 2025: https://www.kff.org/medicare/medicare-advantage-enrollment-update-and-key-trends/
KFF: When Hospitals Ditch Medicare Advantage Plans, Thousands of Members Get To Leave, Too
https://kffhealthnews.org/news/article/hospitals-abandon-medicare-advantage-plans-members-quit-too
HHS OIG: Medicare Advantage Denials Review (2022): https://oig.hhs.gov/reports/all/2022/some-medicare-advantage-organization-denials-of-prior-authorization-requests-raise-concerns-about-beneficiary-access-to-medically-necessary-care/
Johns Hopkins Public Health: Medicare Changes & LIS/MSP: https://publichealth.jhu.edu/2025/the-changes-coming-to-the-aca-medicaid-and-medicare
Kiplinger: Major Insurers Scale Back Medicare Advantage and Part D Plans for 2026
https://www.kiplinger.com/retirement/medicare/insurers-scale-back-medicare-advantage-and-part-d-plans-for-2026
Insurance News Net: As insurers drop Medicare Advantage plans, seniors scramble for coverage
https://insurancenewsnet.com/oarticle/as-insurers-drop-medicare-advantage-plans-seniors-scramble-for-coverage
Disclaimer
This content was developed by the WNC Health Policy Initiative in consultation with people and organizations with connections to the health of people of Western North Carolina. Individual or organizational opinions, findings, conclusions, or recommendations are those of the relevant author(s)/interviewee(s) and do not necessarily reflect the view of the WNC Health Policy Initiative or its host institutions of the University of North Carolina Asheville (UNCA), Mountain Area Health Education Center (MAHEC) or our funders.
