Association Between the Medicare Advantage Quartile Adjustment System and Plan Behavior and Enrollment


Medicare Advantage (MA) has grown in popularity but critics believe that insurers are overpaid, partially due to the quartile adjustment system that determines plan benchmarks. However, elimination of the quartile adjustments may lead to less generous benefits and fewer plan offerings, which could slow MA enrollment growth. The quartile adjustments increase payment for plans in counties with low Traditional Medicare spending and lowers payment for plans in high spending counties. Thus, it creates discontinuous jumps in payments at the quartile cutoffs. We use 2017-2021 data and a regression discontinuity design to examine changes in insurer behavior and MA enrollment between quartiles. Our analytic sample includes 1,557 county observations. We find clear discontinuities in the quartile adjustments and benchmarks. Monthly premiums and the share of plans offering premiums decline with an increase in the adjustment factor. We did not find significant changes in primary care copayments, supplemental benefits, the number of plans, the number of contracts, or MA enrollment. Our findings suggest that MA plans are not very sensitive to modest changes in payment rates. Modifications to the quartile adjustment system may generate sizable savings without substantially impacting MA beneficiaries.

JAMA Health Forum