Private Medicare insurers are likely to benefit in Trump’s new administration

Medicare Advantage insurers thrived under the first Trump administration, and it’s expected to happen again now that Trump is returning to the White House and Republicans are taking control of Congress.

The Medicare Advantage program is expected to cost taxpayers and beneficiaries more than $500 billion this year. For the past decade, it has been the insurance industry’s golden goose of profitability. But insurance companies have lamented recent regulations, worrying their margins will take a hit.

STAT’s new report, “Medicare Advantage decoded,” unpacks what you need to know about this lucrative and fast-growing piece of the U.S. health care system. The report covers how Medicare Advantage works, how it compares to traditional Medicare, which health insurance companies have come to dominate the industry, and what is changing heading into 2025.

The Biden administration gave Medicare Advantage insurers one of the largest-ever payment increases in 2023. Since then, the government has chipped away at the program’s overpayments and care denials by reforming how plans can code the diagnoses of their members, encouraging more aggressive audits, and demanding insurers not use algorithms and other technology as a sole basis for coverage decisions.

Republicans, meanwhile, have routinely backed Medicare Advantage. Some want to make it the default choice for Medicare beneficiaries. And Trump has a history of catering to the industry. For example, the Trump administration gave an above-average payment raise to Medicare Advantage plans in 2019. David Windley, a health care analyst at the investment bank Jefferies, said at the time the Trump administration created “a friendly environment” for the industry.

Trump’s nomination of Mehmet Oz to run the federal agency that oversees Medicare has Wall Street and insurers giddy for a return to those conditions. Oz previously was an uncritical salesman for Medicare Advantage plans on his TV show.

“Oz’s past affinity for MA reinforces our expectation for a more favorable regulatory backdrop for carriers in the coming administration,” Ben Hendrix, a health care analyst at RBC Capital Markets, wrote in a note to investors last week.

Approximately 36 million people are expected to be enrolled in a Medicare Advantage plan by the time 2025 rolls around, according to the latest federal estimates. Medicare’s annual enrollment window ends Dec. 7.

Medicare Advantage market expected to grow in 2025, despite big changes from insurers
Although insurers are banking on less scrutiny and higher payments in Medicare Advantage longer term under Trump, 2025 is still expected to lead to thinner margins than insurers are used to. But that’s mostly because many insurers have bungled their predictions of how much care their enrollees have needed. Some insurers, like CVS Health’s Aetna and Elevance Health’s Anthem, have cut off broker commissions for new Medicare Advantage enrollees in some areas as a way to limit enrollment.

Credit rating agency A.M. Best on Tuesday issued a “negative” outlook for the Medicare Advantage market for the next 12 months. The biggest reason for that outlook: Older adults and people with disabilities continue to get more higher-cost care that may have been delayed during the pandemic — especially surgeries, cancer care, and other procedures that require hospitalization. Expensive prescription drugs will weigh heavily on Medicare Advantage plans as well.

“Ongoing improvements in medical science and advances in new treatments, including cell and gene therapies and specialty drugs such as GLP-1s or new drugs to treat certain phases of Alzheimer’s, have also contributed to the MA segment’s narrowing margins,” A.M. Best analysts said in the report.

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