Medicare Advantage: An origin story

Nov. 20, 2023 / By Clark Cameron

In 1997, the Balanced Budget Act established a new part of Medicare called “Medicare + Choice” or Medicare Part C. Under this program, the federal government outsourced administration of Medicare hospital (Part A) and physician (Part B) coverages to private health insurers for beneficiaries who chose (hence the name) coverage other than original Medicare. At that time, Medicare + Choice was not very popular and fewer than 4 percent of beneficiaries selected this option.  

Fast forward six years to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. This groundbreaking legislation introduced a prescription drug benefit (Part D) to beneficiaries and rebranded Medicare + Choice (M+C) as Medicare Advantage (MA). Most of these new MA plans offered a Part D drug plan and enrollment grew steadily.  

In the two decades since being added to the Medicare mix, MA enrollment has risen from 4 percent of total enrollment to 51 percent or nearly 31 million enrollees. That’s a 12 percent compound annual growth rate (CAGR) for 20 years – a pretty remarkable performance. That growth is expected to continue, and the result will alter the U.S. health care landscape permanently. 

A few weeks ago, I sat down with the driving force behind Medicare Advantage, former Centers for Medicare & Medicaid Services (CMS) Administrator Tom Scully. If you’d like to hear the full MA origin story, including some interesting and humorous anecdotes along the way, check out the latest “Road to Value” podcast. 

Clark Cameron, is director of payer commercialization at 3M Health Information Systems.