Medicare Advantage: Dispelling market misconceptions


Five misconceptions are limiting payors’ ability to take advantage of the opportunities in the MA market—but those opportunities are considerable. To succeed in this market, payors must balance tailored investments in local-market planning and care-delivery effectiveness with greater administrative efficiency.

Over the past several years, Medicare Advantage (MA) has proved to be a growing and profitable market, especially for payors that have invested in and focused on it. However, recent MA rate cuts and the tightening of both risk-adjustment rules and stars revenue potential have led some to doubt whether MA remains a viable business.

We disagree. We believe that MA will remain one of the most exciting growth opportunities for payors over the next several years, as well as a venue for innovations in care delivery and reimbursement. Our analyses suggest that by 2018, membership could grow by 4 to 6 million, revenue potential could reach $180 billion to $200 billion, and profit pools could range between $5 billion and $10 billion.1

In this article, we discuss five common misconceptions about MA and describe the strategies and capabilities payors will need to sustain a profitable MA business.

  1. McKinsey Medicare Growth Model, based on May 2013 data from the Congressional Budget Office.