Medicare Advantage is covering more and more Americans − some because they don’t get to choose

Since the mid-2000s, the Medicare system has dramatically transformed. Enrollment in Medicare Advantage – the private alternative to the traditional Medicare program administered by the government – has more than quadrupled^[1]. It now accounts for the majority of Medicare enrollment^[2].

Employers, including state government agencies, are helping drive this growth in Medicare Advantage sign-ups. The increase in people on Medicare Advantage plans burdens taxpayers^[3] and means more patients can be denied^[4] doctor-ordered care.

At the same time, it is often difficult for people enrolled in Medicare Advantage to switch to traditional Medicare^[5].

Medicare^[6] insures people 65 or older and some who are younger and disabled^[7]. Attracted by lower premiums and co-pays^[8] and the promise of extra benefits, many over-65 Medicare beneficiaries are voluntarily choosing Medicare Advantage, often switching away from traditional Medicare when they’re relatively young and healthy^[9].

At the same time, many private^[10] and state employers^[11] have shifted their retirement plans so that the health benefit employees have earned counts only toward Medicare Advantage plans that replace traditional Medicare.

We are health care^[12] policy experts^[13] who study Medicare, including what’s driving the changes in employer health care subsidies and why health care choices may be difficult for many people.

Vanishing choices

As of early 2025, health care subsidies for retired state employees in 13 states don’t include^[14] traditional Medicare supplement plans. The subsidies apply only to Medicare Advantage plans.

In the private sector, just over half of large employers that offer Medicare Advantage have used it to replace traditional Medicare^[15] instead of offering their employees a choice.

When private and state employers drop the option for the Medigap insurance that supplements^[16] rather than replaces traditional Medicare, retirees must choose a fully privatized Medicare Advantage plan or pay the full cost of a supplemental Medigap plan on their own^[17]. Medigap lowers or removes traditional Medicare’s co-pays and deductibles.

When a person first enrolls in Medicare^[18], Medigap costs US$30 to $400 a month, depending on coverage and location. But in most states, it can cost more if a person switches into the plan^[19] after the first year. There are some protections for people whose employer-sponsored plans change or are canceled^[20]. Enrollees should contact their local State Health Insurance Assistance Program^[21] advisers to understand their options.

Altogether, 54% of people using Medicare^[22] are now using the private Medicare Advantage program, an increase from 8 million to 33 million^[23] between 2007 and 2024.

Changing times

After President Lyndon B. Johnson signed Medicare into law^[24] in 1965, older Americans usually received^[25] health insurance through the government-administered traditional Medicare health insurance program. The Medigap private insurance^[26] for co-pays and deductibles was standardized^[27] in 1980.

Today, a person signing up for Medicare also has, on average, more than 30 Medicare Advantage plan options^[28] – privately run alternatives to traditional Medicare and Medigap. The two largest providers, UnitedHealthcare and Humana, administered nearly half^[29] of all Medicare Advantage plans in 2024.

Navigating the current Medicare system can be overwhelming^[30], and the Medicare Advantage option is expensive^[31] for taxpayers. As policymakers continue to weigh potential reforms, it’s important to understand why Medicare Advantage has become so popular, who is enrolling in Medicare Advantage, and what aspects of Medicare Advantage plans may be important to them.

Switching into Medicare Advantage

The bulk of Medicare Advantage’s rapid growth has come from people switching from traditional Medicare into Medicare Advantage^[32]: In 2021 alone, over 7% of Americans covered by traditional Medicare switched to Medicare Advantage, but only 1.2% of those with Medicare Advantage coverage switched to traditional Medicare.

This growth mirrors the privatization of Medicaid^[33], the federal and state health insurance program^[34] for people with low income. About 74% of beneficiaries^[35] are now enrolled in private Medicaid plans. With Medicaid, people generally don’t have a choice – they are usually switched to a private plan^[36] by their state governments.

But for Medicare, the privatization trend is not so simple.

Compared with traditional Medicare, Medicare Advantage plans are, on average, paid more^[37] by the taxpayer-funded Medicare system for covering each enrollee. Advantage plans also have more flexibility to limit their medical costs by restricting provider networks^[38] and requiring prior authorization^[39].

The extra benefits of Medicare Advantage

Some of these extra funds result in higher profits^[40] for insurers, but they also partially finance benefits that are not part of regular Medicare.

These benefits include limits to out-of-pocket costs^[41] traditionally offered by the supplemental Medigap plans and dental, hearing and vision coverage^[42] that Medicare doesn’t provide.

In the past decade, lawmakers have introduced^[43] several bills^[44] to add this coverage, but Congress has not passed any of them.

Medicare beneficiaries give many reasons^[45] for choosing their health plan. The most common reasons are different for people covered by traditional Medicare versus Medicare Advantage. Of people who have traditional Medicare coverage, 40% prefer to have more^[46] doctors and hospitals to choose from. A similar percentage of those with Medicare Advantage cite extra benefits or limits on out-of-pocket costs.

Economic insecurity and advertising

These financial protections and extra benefits are important for some older adults, given high rates^[47] of poverty and economic insecurity among people who are 65 or older. Though these supplemental benefits may not be very accessible^[48], a quarter of surveyed beneficiaries said they were a primary reason for enrolling in Medicare Advantage. An additional fifth cited lower out-of-pocket costs.

Medicare Advantage plans also typically include a low-cost drug plan that people who opt for traditional Medicare pay for separately as Part D^[49].

Compared with a traditional Medicare plan that doesn’t include a supplemental Medigap plan to limit premiums and co-pays, Medicare Advantage’s premiums and co-pays contribute to an estimated 18% to 24% lower^[50] out-of-pocket spending.

Brokers, agents and advertisements also play an important role in which plans people choose^[51]. In a survey of people who have Medicare coverage, one-third said they used an agent or broker^[52] to choose a plan. Of those living below the federal poverty line, 12% said they relied on advertising^[53].

While these sources can inform beneficiaries about the many options, many policymakers have raised concerns about^[54] misleading marketing^[55] steering people into plans that don’t serve their needs. Brokers and agents may have more incentive^[56] to guide patients to Medicare Advantage because they are paid more for enrolling people in fully privatized plans^[57] than in the Medigap and Part D plans that supplement traditional Medicare.

Retirement benefits shifted to Medicare Advantage

Changes in retirement benefits are also contributing to the growth in Medicare Advantage.

A majority of state employee^[58] health care retirement benefits include Medicare Advantage plans. And in 13 states, the health care benefit for retired state employees does not include a choice of Medigap: Alabama, Arizona, Colorado, Connecticut, Georgia, Illinois, Kentucky, Maine, Michigan, Missouri, New Hampshire, Pennsylvania and West Virginia.

In the private sector, the share of employers offering retirement health care benefits to their employees has declined since the 1990s: Only 21% of large employers^[59] offer those benefits today compared with 66% in 1988. But among private employers that still offer retirement health care benefits, those offering Medicare Advantage more than doubled^[60] between 2017 and 2024, from 26% to 56%.

Just over half of large employers that offer Medicare Advantage have used it to replace regular Medicare^[61] instead of offering their employees a choice. This means that to remain in traditional Medicare, retirees would have to give up an employer subsidy that covers all or part of the Medicare Advantage premium and pay the full Medigap premium.

Private employers that still offer subsidized health care insurance as a retirement benefit but offer only Medicare Advantage^[62] include IBM^[63] and AT&T^[64].

Employers cite the shift as a necessary response^[65] to rising health care costs, though many retirees have protested the trend. Medicare Advantage premiums are generally cheaper than Medigap premiums, saving employers money, in exchange for retirees potentially being denied care more often. New York City employees successfully prevented the switch^[66].

Stuck in Medicare Advantage

For many Medicare beneficiaries, switching to Medicare Advantage is a one-way street^[67] because most states don’t offer switchers the guaranteed issue^[68] and community rating^[69] protections for Medigap supplemental coverage plans that people get when initially signing up^[70] for Medicare. These protections^[71] prevent people from being denied coverage or charged a higher price for preexisting conditions.

This increased cost in most states of switching back to regular Medicare after age 66½ – especially for people with serious health conditions – may reduce the number of people^[72] who do so. But some switch despite the cost^[73].

Meanwhile, 5% of people who used Medicare Advantage plans in 2024 had to find a new one in 2025 because of a plan being discontinued^[74]. There is a silver lining, however: For the first 63 days after their coverage ends, people in failed plans can choose^[75] traditional Medicare plus a Medigap supplement with the guaranteed issue protection that in most states applies only during the first year^[76] of Medicare eligibility.