MedPAC’s Narrow Lens on Medicare Advantage Is Incomplete
Medicare Advantage now covers more than half of eligible Medicare beneficiaries, making its impact on hospitals, health systems and patients impossible to ignore. As enrollment continues to grow, the Medicare Payment Advisory Commission is right to examine whether that trend is affecting hospital finances. However, its latest analysis should be interpreted with caution.
Importantly, MedPAC’s analysis identifies associations, not cause and effect, between MA enrollment and hospitals’ all-payer margins. In other words, it does not determine whether MA enrollment growth is driving changes in hospital finances. Therefore, while the report is asking the right questions, its conclusions fall short. Policymakers and stakeholders should not rely on their findings in isolation, particularly in the absence of a more comprehensive assessment of how MA plan practices affect hospitals’ financial stability, operations and ability to support timely access to care.
Analysis of All-payer Margins Does Not Capture Medicare Advantage’s Full Impact
One of our main concerns about MedPAC’s analysis is its reliance on broad all-payer margin measures, which can obscure MA-specific payment effects and mask important differences across hospitals, markets and plan practices. MedPAC’s analysis does not directly capture the cumulative impact of prior authorization, denials, downgrades, delayed payments, contracting dynamics or the resources hospitals must devote to securing payment of medically necessary care. These issues can affect hospitals differently depending on payer mix and market dynamics, with some hospitals having less negotiating leverage and fewer administrative resources — which makes them more vulnerable to changes in plan behavior. Together, these limitations likely understate the real and growing financial pressures MA places on hospitals.
Even when MA payment rates appear comparable to traditional Medicare, those comparisons can miss the additional costs hospitals incur to secure payment for medically necessary care. The additional costs associated with MA are not neutral — they add up over time and contribute to the financial strain on hospitals.
Medicare Advantage Practices Add Unnecessary, Costly Burdens on Patients, Hospitals
Hospitals consistently report that prior authorization, payment denials, downgrades, delayed payments and extensive documentation requirements require significant staff time and operational resources. MedPAC’s own analysis reinforces those concerns, finding that MA patients had hospital stays that were 11.2% longer than comparable traditional Medicare patients’ stays in fiscal year 2024, a difference that MedPAC notes can increase hospital costs, beneficiary cost sharing and capacity pressures. Those burdens divert clinical and financial resources away from patient care and can jeopardize hospitals’ ability to sustain essential services. For patients, the consequences are immediate and tangible: delays in care, unexpected bills and confusion about coverage decisions that should be straightforward. When medically necessary services are denied, or payment is stalled, patients are left navigating complex appeals processes at the very moment they need care the most.
As the MA program has grown larger, so too have hospitals’ and health systems’ concerns about the widespread use of prior authorization and other utilization management tools, which often delay or disrupt access to clinically appropriate care. These requirements can override physician judgment, forcing providers to spend valuable time securing approvals rather than treating patients. In many cases, patients experience postponed procedures, extended hospital stays or interruptions in post-acute care transitions. These delays not only worsen health outcomes but also increase stress and uncertainty for patients and their families, undermining trust in the healthcare system.
Medicare Advantage Disproportionately Impacts Rural Hospitals, Patients
These issues are especially important for rural hospitals, which often operate with limited financial reserves and lean administrative teams and may have fewer resources to absorb the MA-related administrative burden. An AHA analysis has found that MA plans reimburse rural hospitals below traditional Medicare — well below the cost of care. When MA plan practices delay or complicate care transitions, patients may remain in inpatient beds longer than clinically necessary, acute-care capacity may be strained and hospitals may face additional staffing, operational and financial pressures.
Medicare Advantage Plan Practices Add Strain to Post-acute Care
Furthermore, persistent challenges created by MA-related pressures extend across the full continuum of care, including post-acute care settings. MedPAC found that longer hospital stays for MA patients were especially pronounced for patients awaiting discharge to post-acute care settings, including skilled nursing facilities and inpatient rehabilitation facilities. When MA plan practices, including narrow post-acute care networks and prior authorization, delay or complicate care transitions, patients may remain in inpatient beds longer than clinically necessary, and recovery can be disrupted.
MedPAC has taken an important step by focusing attention on how MA enrollment growth affects hospitals. To truly understand MA’s impact on hospitals and health systems, analyses must move beyond broad all-payer margins and examine how plan practices shape hospital finances, operations and patients’ access to timely care. This includes assessments of their administrative burden, delayed payments, denials, downgrades, care transition challenges, and differences across provider types and communities. Doing so will support a more accurate understanding of how MA affects hospitals’ financial stability and their ability to provide timely access to care for their patients and communities.