Medicare Enrollment Proposals Would Speed Shift to Private Care

Medicare’s shift toward privatization could get a significant boost if the Centers for Medicare & Medicaid Services embraces either of two conservative proposals that could increase enrollment in the program’s bulging managed care option.

Project 2025, the Heritage Foundation’s national policy blueprint, calls for all new Medicare-eligible adults to “opt-in” to the program through a private Medicare Advantage plan rather than the traditional fee-for-service program, the historic landing spot for new enrollees since the program’s inception.

The Paragon Health Institute, a conservative think tank, wants to require newly eligible beneficiaries to “affirmatively choose” one or the other.

With strong Republican support of Medicare Advantage and GOP control of Congress and the White House, “I think the stars are properly aligned for something like this to take place,” said Robert Moffit, senior research fellow at the Heritage Foundation’s Center for Health and Welfare Policy. He said either proposal would be an improvement over the current system.

Fifty-four percent of eligible beneficiaries are already enrolled in Medicare Advantage plans, which are offered by private insurers like UnitedHealth Group, Humana, and CVS Health. The Congressional Budget Office expects that to reach 64% by 2034.

Both sign-up proposals would likely increase or hasten those MA growth projections, said Moffit and David Lipschutz, litigation director at the Center for Medicare Advocacy.

“The thumb is already firmly on the scales in favor of Medicare Advantage enrollment, and implementing either of these policies would just exacerbate that,” Lipschutz said.

But if either proposal is adopted without accompanying changes in the MA payment system, Moffit, Lipschutz, and others said the change could also weaken Medicare’s overall finances just as millions of aging baby boomers are swelling program ranks, and fewer working-age adults will be around to fund the program.

“You’re going to be stuck with a problem,” Moffit said, if the proposals become policy without addressing MA’s “flawed” risk adjustment system, and “broken” payment system, which can inflate plan reimbursements. “And they are going to fester as fiscal problems,” he added later.

Oz and Medicare Advantage

The proposals are receiving fresh attention because CMS Administrator Mehmet Oz is a longtime supporter of the MA program.

Earlier this month, the CMS boosted payments to MA plans by an average of 5% for 2026, even though MA coverage will cost 20% more per enrollee this year than fee-for-service Medicare, the Medicare Payment Advisory Commission estimates.

That’s $84 billion more to care for beneficiaries than if they were in traditional Medicare. The federal government is projected to pay MA plans $538 billion this year, up from $494 billion in 2024.

“Although he hasn’t spoken much, prior to his appointment, about his policy intentions and what he wants to do to improve health care in America, the one thing” Oz has “been very clear about is that the privatization of Medicare is high on his agenda,” said Donald Berwick, senior fellow at the Institute for Healthcare Improvement and a former CMS administrator.

Officials at the Department of Health and Human Services did not respond to questions about either proposal, but said HHS is committed to strengthening Medicare by promoting greater choice, competition, and affordability for American seniors. The agency’s focus remains on advancing reforms that align with President Donald Trump’s vision of improving health outcomes, empowering beneficiaries, and delivering better value across the Medicare program, according to the official.

Constraining Medicare Spending

An influx of aging baby boomers, greater use of medical services, and inflation are expected to drive 7% to 8% annual increases in Medicare spending over the next decade, as program costs nearly double from $1 trillion in 2023 to $1.9 trillion in 2032, the commission estimates.

That means 22% of personal and corporate income taxes will be needed to fund Medicare prescription drug and outpatient benefits in 2030 compared with 17% in 2023. Yet by 2029, only 2.5 workers per beneficiary will fund the program, down from 2.8 in 2023, the commission said. That reality makes constraining Medicare spending a high priority.

In a tradeoff for lower premiums and provider networks, Medicare Advantage provides a cap on catastrophic health-care costs, and offers supplemental benefits such as vision and hearing coverage that FFS doesn’t offer. Unlike traditional Medicare, which pays for each medical service provided, private MA plans receive monthly payments to cover each beneficiary’s cost of care.

The higher costs for MA care result mainly from “favorable selection,” when plan payments exceed predicted medical costs, and “coding intensity,” the inflated diagnosis of patient ailments.

‘Basically an Antique’

Lawmakers and policy makers “should ask themselves why traditional Medicare should be the default” enrollment “option when it’s based on a 1965 Blue Cross Blue Shield model,” said Moffit, a former HHS deputy assistant secretary.

“You’re talking about something that is basically an antique,” he said of traditional Medicare. “Who would buy today, with their eyes open, a health policy that doesn’t have any protection against the financial devastation of a catastrophic illness? We just keep doing it because we’re used to doing it.”

Since managed care has become the dominant form of job-based health coverage, “if you’re becoming eligible for Medicare and you already have a managed care plan from ‘company x,’ a lot of people just say ‘well, I’m not thrilled with it, but I’ll stick with what I know,” and go with Medicare Advantage, Lipschutz said.

But Berwick said “traditional Medicare is a better place for most patients,” because unlike MA, it has no provider network restrictions or pre-authorization requirements.

Both enrollment proposals are “bad policy,” he said. “And if we allow this continued slide into privatization to occur, which appears to be the intention of this administration, a lot of beneficiaries are going to be hurt.”

Any change in the enrollment of new beneficiaries would necessitate enrollee information so people with diverse needs and ailments could decide which MA plan to select, whether to opt out, or whether to go with fee-for service coverage instead, said Carrie Graham, director of the Medicare Policy Initiative at Georgetown University.

The debate offers an opportunity, Graham said, to weigh adding a catastrophic out-of-pocket spending cap to fee-for-service Medicare to help even the playing field with MA coverage.