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VideoHow Medicare Advantage Benefit Changes May Affect Provider Revenue and Valuation
Health Care Valuation Services
Health Care Valuation Services
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Potential Effect on Provider Revenue and Valuation
Medicare Advantage (MA) plans are increasingly adjusting benefit designs in response to elevated utilization trends. Utilization has exceeded expectations, simultaneously benefiting provider MA revenues and profits. As plans look to manage rising costs, those changes may also influence where and how often members seek care. MA plans are responding through higher cost-sharing, narrower benefits and more restrictive utilization management. These utilization management strategies may have downstream effects on both patient behavior and provider revenue.
By the Numbers
One way MA plans can increase patient financial responsibility is by raising maximum out-of-pocket limits (MOOP), which caps the amount a member may pay for covered in-network services during a year. The table below shows how average annual MOOP limits for MA plans have increased over the last four years. As the graphic illustrates, average MOOP limits have increased year over year, potentially exposing MA members to higher out-of-pocket costs before reaching their annual limit.
Average medical MOOP limit for general enrollment MA plans in the last four years
Source: KFF
This reflects an increase of over 15% from 2023 to 2026, with the most significant increase occurring in the last two years. Higher MOOP limits shift a greater portion of health care costs to patients, particularly higher-utilization populations. The impact may be most pronounced for patients who require multiple services or procedures and are more likely to approach their annual out-of-pocket maximum.
Why it Matters
- Among other benefit design changes, rising MOOP limits may indicate that MA plans are attempting to curb utilization growth by increasing patient financial responsibility.
- Higher cost-sharing may reduce discretionary use of health care services, particularly in outpatient and ancillary care settings. Patients facing higher out-of-pocket exposure are more likely to defer nonurgent procedures, seek lower cost alternatives or reduce overall health care utilization. Over time, these behavioral changes could affect provider volume growth assumptions.
- For providers, this creates greater uncertainty around future revenue growth. While MA penetration continues to increase, the per-member utilization curve may flatten or decline, particularly in elective and moderate acuity service lines. Organizations that have benefited from utilization growth may need to reassess forecasting assumptions.
Health Care Valuation Takeaways
- Valuators should closely evaluate exposure to MA populations, particularly in outpatient-focused businesses. Historical utilization growth assumptions tied to MA expansion may no longer apply. Understanding how changes in benefit design affect utilization trends can help determine whether historical growth rates remain supportable.
- Rising MOOP limits introduce risk to volume and revenue projections, especially for discretionary services. Valuators may consider additional risk adjustments when assessing proforma revenue assumptions.
- Providers with high MA concentration may warrant higher risk adjustments or revenue sensitivity scenarios. Sensitivity analyses can help quantify the potential effect of changes in utilization on projected revenue.
- Valuators should incorporate the interaction between payer mix, benefit design, patient cost sharing and utilization behavior to formulate a more accurate and thorough valuation conclusion. These factors can provide additional context when evaluating the sustainability of projected volume and revenue growth.
As Medicare Advantage plans adjust benefit designs, providers and investors may need to revisit growth, volume and revenue assumptions. Weaver can help. Our professionals can evaluate the potential impact on forecasts, transactions and valuation analyses. Contact us.
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