McKinsey: The Future of Medicare Advantage

The undeniable story of early 2024 for US health insurers has been the sustained economic pressures that Medicare Advantage (MA) payers are experiencing. This was borne out in 2023 year-end financial results, with several MA payers pointing to inpatient and outpatient care utilization being higher than expected, consequently increasing the medical-loss ratio. Looking ahead, the financial pressure on payers could worsen. In its 2025 advance notice for new payment rates, the U.S. Centers for Medicare & Medicaid Services (CMS) notes that there will be an aggregate revenue growth (3.7 percent) when the increase (3.86 percent) driven by the risk score trend is included. Payers’ estimates of this number, however, vary widely.

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