Will Hospital Margins Grow as Medicare Advantage Membership Increases?
Historically, high resource costs, outdated infrastructure, and reimbursement lags have hindered hospitals’ ability to predict near-term financial health. And as Medicare Advantage (MA) member numbers continue to grow, many expect hospital margins to worsen.
But, according to a 2026 analysis by the Medicare Payment Advisory Commission (MedPAC) staff and commissioners, MA enrollment does not significantly shift profit margins for hospitals in their respective counties.
Understanding MedPAC Research & The Future of MA Growth
MedPAC research shows that health systems have successfully held their margins despite Medicare Advantage expansion. While higher enrollment generated lower revenues, it also drove down costs, leaving margins largely unchanged. Data reveals that for every 10 percent increase in county MA penetration, all-payer revenues and costs decreased slightly, resulting in a statistically insignificant impact on margins, with even less impact observed for hospitals financially integrated with MA plans.
Beyond immediate margins, analysts expect rising enrollment to alter the add-on payments hospitals use to offset uncompensated care. This shift occurs because the payment formula reacts sharply to changes in total MA and fee-for-service discharges. However, MedPAC staff and commissioners noted that further analysis is needed to determine exactly how these changes affect uncompensated care payments.
In the coming years, MA growth is expected to continue to grow, but at a slower rate than in prior years. While MA enrollment rose by 8 to 9% annually from 2019 to 2024, McKinsey estimates the growth rate will moderate to 4 to 5% annually from 2024 to 2029.
Navigating MA Growth: Strategic Risk Adjustment for Payers and Providers
Since CMS implemented risk adjustment in 1985, higher payment rates have incentivized MA insurers to take on high-risk members. As member enrollment follows this upward trend, MA will likely continue to grow.
Strategic risk adjustment also plays a critical role for the providers delivering the care. By precisely coding current Medicare Advantage patients, providers can defend their margins and offset revenue losses.
Get Started with RAMP!
To make a real impact on financials, payers and providers need experts in data analytics. FRG RAMP analyzes member-level data for each payment year to support complete chronic condition and diagnosis documentation for accurate CMS risk adjustment submissions and right-sized revenue per member. Its clear findings help payers, providers, and hospitals achieve value-based care goals.
To learn more about FRG, your partner for healthcare financial intelligence, contact us online or call 888-466-1025.