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Puts & takes
A running joke in my circle of friends is that the question of what costs more, Original Medicare or Medicare Advantage, is largely unresolved and potentially unknowable. Every year, MedPAC shares a slide like this, making the case that between coding and selection effects, MA is about 114% the cost of the Original Medicare:
My read of the 2025 Medicare Trustees Report doesn’t explicitly agree or disagree with this assessment, but you can do some back-of-the-envelope math based on this table and the text, which states that about 50% of enrollees are in MA plans :
Out of the 67.2m enrollees, roughly 33.4m were in MA plans in 2024, which leaves 34.2 million in Original Medicare, and you can break out the MA benefits on the Private health plans total line at $494b, which equates to ~$470b for Original Medicare. That works out to MA Per Member Per Year costs of ~14.7k and Original Medicare Per Member Per Year costs of $13.7k. You shouldn’t take these numbers too seriously for a lot of reasons. Depending on what source you use, the enrollment split might have been closer to 50%, as it states in the trustees' report, or MA might have been closer to 54%, according to this KFF report.
Again, largely unresolved and potentially unknowable.
The Better Medicare Alliance, the industry group that represents MA plans, frames up the argument differently, focusing on out-of-pocket cost savings for beneficiaries ($3,486 annually) and better outcomes than Original Medicare.
There are all sorts of other adjustments you can make to tilt the numbers in one direction or the other. Hospice is always covered by Original Medicare, and end-of-life care is very expensive. Skin substitute spending was much lower in MA than OM, indicating embedded savings from waste, fraud, and abuse.
What prompted me to think about all this this week was an op-ed in the Wall Street Journal that accused MedPAC of undermining Medicare Advantage. MedPAC certainly has a house view on the relative cost per member per year between the two programs, but the programs are so complicated, and the numbers are so large, that it’s truly an open question.
My own amateurish view is that MA is likely more expensive per member, based on the mechanics of county benchmarks, rebates, and a degree of favorable selection for MA, which has fewer ESRD patients and no hospice costs. But I also don’t think it matters that much. The more interesting and important questions, in my own view, are those related to value for money: what’s the local maximum of quality and cost for Medicare beneficiaries? Unfortunately, these questions are just as unresolved, and perhaps even more unknowable, than the comparably simple one of which costs more: MA vs OM.
Top of mind in health care policy & financing
Humana reported Q4 earnings yesterday, Wednesday, February 11th, but analysts were much more interested in what they shared about individual Medicare Advantage membership growth from the Annual Enrollment Period (AEP): approximately 1 million, or 20%, effective 1/1/2026, and anticipating 25% growth for the full year 2026.
Humana joins Alignment Health, Clover Health, Devoted Health, Scan, and Clever Care Health on Team Growth during this AEP, while UnitedHealthcare, Aetna, Elevance, Centene, and Molina were all Team Contraction as they focus on profitability.
Back in the fall, CMS estimated that MA enrollment would be flat-ish YoY, but after accounting for all reported growth net of contractions, I’d pencil in modest growth for MA going into 2026, driven by regional not-for-profits and local Blue plans.
As Kevin noted in our emergency pod post-earnings call, it’s interesting to think about how this growth affects CMS’s calculus on its proposed expected average rate change of 0.09% for 2027. It’s put MA Plan CEOs in an interesting rhetorical pinch where they say without equivocation that the rate increase is grossly inadequate, but in the same breath also try to soothe their investors that they will manage to their long-term margins.
CMS released the 2027 Payment Notice proposed rule for the Affordable Care Act Exchanges, and its plans and brokers.
The headline for those interested in the health of the ACA marketplace and appetite for employers to switch to ICHRAs is that CMS expects these changes to decrease ACA enrollment between 1.2 and 2 million in 2027 due to the reduced subsidy eligibility, price sensitivity, and adverse selection cycle, raising premiums by 2-3%. CMS expects the premium increase will be more than offset by other changes to Special Enrollment Periods, which will mitigate the adverse selection problem, resulting in a 1.5-1.8% premium reduction relative to baseline, even with lower overall enrollment.
There are also a few notable proposals, including multi-year catastrophic plans, new reporting requirements for Silver Loading, and a new pathway for a state-based exchange that would allow them to essentially outsource the exchange to “web brokers”.
Overall, it reads like a headwind for the individual and ICHRA markets, but a modest one given the dearth of good alternatives for individuals and small-group employers.
Last week, Indiana’s Family & Social Services Administration announced it would be putting ~$68 billion worth of contracts up for bid this summer in “the mother of all procurements.”
After reading the headline and listening to Molina’s earnings call, my immediate thought was “this has Molina’s name written all over it,” but reading the article, there was some interesting color on managed care orgs that have tried and fallen short in the Hoosier state:
The PathWays for Aging program has been plagued with issues since it launched July 1, 2024,” the release said. “The program allows Humana, Elevance Health and United Health Care to oversee, on behalf of the state, the Medicaid coverage for 117,000 Hoosiers in need of nursing home level of services.”
“Humana and Elevance were placed on corrective action plans with the state soon after the program’s launch due to a multitude of billing, claims processing and other contract violations,” the association said. “All three of the insurance companies last year owed more than $100 million in late and inappropriately denied Medicaid payments to the nursing home industry.”
Elevance Health was formerly known as Anthem.
Molina Healthcare was also initially selected as a provider for Pathways, but was later dropped by the state.
An HTN community member speculated that the bulk of these challenges were rooted in Long Term Social Supports and Home and Community-Based Services and Supports providers, typically small businesses, struggling with managed care protocols.
The Hickpuff Review
Centene reported earnings last week and shared that while fundamental medical trend came in as expected, the No Surprises Act Independent Dispute Arbitration process pushed up medical benefits by 1% in the quarter. Friend of HTN, Lawson Mansell, has written about the broken IDR process here and here.
Health system operator Tenet reported earnings shortly after Humana. Their ambulatory surgery center business USPI posted an impressive 39.2% EBITDA margin for the year.
It seems worth noting, while we talk about affordability in healthcare, that, like their similarly situated peers, much of the story here centers on price and acuity growth relative to revenue growth.
They’re expecting about $250 million in EBITDA headwinds from the expiration of the enhanced premium tax credits in 2026.
Medicaid State Directed Payments for 2025 were on the order of ~$1.3 billion, and they’re expecting ~$1.2 billion in 2026.
Consummate health tech nerd Casey Langwith shared an interesting series of posts on TrumpRx. I recommend starting with this one about how it works under the hood between GoodRx, Eli Lilly, Novo Nordisk, and a handful of specialty pharmacies: “Evernorth's Freedom Fertility and VFP, CVS Caremark, Alto Pharmacy, and several established independents like Mandell's.”
The New York Times’ Ben Blatt and Teddy Rosenbluth bravely waded into the scope of practice wars with an article titled Physician Assistants Want a New Name and More Power. Not Everyone Is Happy (gift link).
Former CMMI leaders Liz Fowler and Purva Rawal published another entry in their series about Medicare and Medicare Advantage, this one focused on a proposed transparency scorecard, which would be a real treat to read for health policy nerds like me.
More from Health Tech Nerds
We heard from a number of you that you’d prefer to listen to the team muse about healthcare topics with each other and industry leaders in podcast form rather than watch on our YouTube channel.
Well, if that’s you, today is your lucky day - you can now check out Health Tech Nerds Radio on your favorite podcasting platform. Subscribe to HTN Radio on Spotify here, and Apple Podcasts here!
So far this week, we released a special report on the Humana earnings call, an interview with Sempre Health CEO Anurati Mathur on medication affordability, and our weekly recap of the news, The Grand Round-Up.
We also featured a couple of guest posts this week that I think are worth your time:
First, Andy Slavitt, the Co-Founder and General Partner at Town Hall Ventures, and Toyin Ajayi, M.D., the Co-Founder and CEO at Cityblock Health, discuss AI in Healthcare for low-income and unhoused populations.
Next, a great overview of how health care companies are actually using AI from Pair Team’s Jacob Mulligan.
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