Cuts to Medicare Advantage Benefits and Service Area Reductions are Business Decisions Made by Insurance Companies to Maintain Profits

Profit first, patients second: As insurers cut benefits and exit markets, Medicare Advantage enrollees are left holding the bag.

Medicare’s annual coordinated election period (AEP), sometimes known as open enrollment or fall enrollment, the time of year when Medicare beneficiaries can make changes to their Medicare Advantage (MA) or Part D plans for the following calendar year, is upon us. While insurance companies have made announcements about some planned changes, in the coming weeks we will all learn more about changes that MA plan sponsors will be making to the benefits they offer.

If benefits offered shrink this year, insurance companies will try to blame everyone and everything other than themselves; but don’t let them fool you – it’s all driven by their interest in maintaining profit.

Background

According to KFF, enrollment in private Medicare Advantage (MA) plans has more than doubled since 2010 to 54% of all Medicare beneficiaries, a number that is projected to grow to 64% by 2034. This growth comes with significant costs for the program. Medicare pays more to MA plans for enrollees than their costs would be in traditional Medicare. According to the Medicare Payment Advisory Commission (MedPAC), the federal government pays MA plans 20% more for MA enrollees than it pays for similar individuals in traditional Medicare, costing the Medicare program $84 billion in 2025 alone. This leads to $13 billion more in Part B premiums paid by all Medicare beneficiaries, including those in traditional Medicare who accrue no benefit from MA plans at all.

MA Rules

Every year insurance companies decide whether they will contract with Medicare. If they do, they decide what their benefits and cost-sharing will be, within certain guidelines, including the following:

• Each MA organization must provide the benefits currently available under Medicare Part A and B (except for hospice) and Part D (if the plan offers Part D coverage).

• MA plans generally impose the same coverage limits set in traditional Medicare (e.g., limit on number of consecutive covered days in hospitals and skilled nursing facilities), but plans have some discretion to ease such restrictions.

• An MA plan may impose copayments and deductibles different from those under Parts A and B, as long as the monthly premium and cost-sharing are actuarially equivalent to cost-sharing under traditional Medicare (in others words, costs will be similar).

• Since 2011, MA plans must establish a maximum out-of-pocket (MOOP) liability amount for all Part A and B services (the Part D cap - $2,000 in 2025 for covered drugs – also applies to MA plans that offer Part D coverage)

• MA plans may not deny, limit, or condition the coverage or provision of benefits based on any health status-related factor; similarly, MA plans cannot design plan benefits in such a way that is likely to substantially discourage enrollment by certain individuals.

Where MA plans really differentiate themselves from traditional Medicare is what they do with much of the excess payments they get from the Medicare program.

If an insurance company submits a bid to the Medicare program that is below a local benchmark amount, the company is paid a portion of the difference – a rebate – which they can use to provide additional services to enrollees (see Urban Institute). This rebate – an average of $2,255 per enrollee in 2025 – has more than doubled since 2018, which, according to KFF, plans use:

to pay for Medicare-covered services, and in most cases, to also pay for supplemental benefits, reduced cost sharing, and lower out-of-pocket limits, which are attractive to enrollees. Plans are able to offer these additional benefits, often without charging an additional premium for Part D prescription drugs or supplemental benefits [due to the rebate].

MA plans use supplemental benefits and reduced premiums and cost-sharing – subsidized by rebates – to entice people to enroll in MA plans, while downplaying some of the drawbacks in MA enrollment, including excessive use of prior authorization and provider network restrictions.

2026 MA Plans

Although 2026 plan information has not yet been released, insurance company announcements – primarily to shareholders – have generally sought to assure investors that maintaining profit will be the companies’ priority when it comes to the delivery of health care.

Citing unexpected utilization of services by members, rising health care costs, and “federal cost-containment measures” Beckers (8/5/25) notes that “the largest MA carriers are cutting supplemental benefits, exiting unprofitable markets and dropping entire product lines ahead of the upcoming annual enrollment period.”

According to the Wall Street Journal (8/6/25) “Insurers are learning the hard way that restoring profitability means accepting lower growth or shrinkage in their Medicare Advantage rolls.” The Journal notes that the board of CVS installed a new CEO in 2024 “who refocused the company on profitability over enrollment growth” and noted that both CVS and Humana “have seen their finances improve as they have given priority to margins.”

UnitedHealthcare’s CEO said it is “repricing its products for 2026 in response to the expectation that elevated costs will extend into much of that year” and notes that it “also plans to exit certain MA plans that are underperforming, which could impact about 600,000 enrollees” (Fierce Healthcare, 8/4/25). United’s CEO told Beckers that “‘We will be watching the market closely as the 2026 Medicare offerings become public so we can better assess our market positioning and respond quickly.’”

Similarly, notes Beckers, Humana expects to lose up to 500,000 members by the end of 2025 “as it continues to exit plans and geographic markets that do not have a clear path to profitability.” CVS/Aetna’s CEO told the publication “‘As we look ahead, we will maintain this intense focus, continuing to diligently execute against our margin recovery plan.’”

So what does all of this business-speak mean for MA enrollees? Similar to insurance company actions going into 2025 (as discussed last year in this Center for Medicare Advocacy CMA Alert), rather than continuing to use their considerable overpayments to offer supplemental benefits aimed at maximizing enrollment, insurers are indicating that they must cut back (or leave entire markets) in order to maintain their steady profits.

Of course if insurance companies wanted to prioritize enrollment and supplemental benefits, they could accept lower profits. If such companies cannot provide contractually-obligated Medicare services to their enrollees without being paid more than Medicare spends on beneficiaries in traditional Medicare and making a significant profit, perhaps they should get out of the MA business.

In the end

Hopefully, as you read this, if you wish to retain your current Medicare Advantage plan coverage you do not reside in an “unprofitable” area, or are considered an “unprofitable” enrollee by your plan.

In order to continue operating, businesses generally must earn a profit. But if we turn our health care over to private businesses, what does this mean when companies don’t earn expected or desired profits? This annual ritual begs the question: Is this really the best way to provide health care to people?

David Lipschutz is Co-Director of the Center for Medicare Advocacy, a non-partisan, non-profit with a mission to advance access to comprehensive Medicare coverage, health equity, and quality health care for older people and people with disabilities.