Are Superbowl ads worth the millions of dollars sponsors pay for them each year? Well, if you are an insurer tied to Medicare Advantage plans, the answer seems to be a resounding “Yes”!
Let me explain. Each year millions tune into the Superbowl – some for the football, some for the halftime show, but many for the commercials. There are whole shows leading up to the big game that highlights the memorable commercials from years past showing Clydesdale’s kicking extra points, supermodels drinking Pepsi, and frogs croaking out their love of beechwood-aged lager. And at $7 million for a 30-second national spot, sponsors are incentivized to make the most of their time in front of 115 million viewers.
This year, sandwiched in between ads for beer and salty snacks, payers and groups lobbying against cuts to Medicare Advantage stated their case in select local markets. Why? Well, CMS and the Biden administration had announced changes to Medicare Advantage (MA) that would reduce payments by over $11 billion in 2024 alone, and result in just a 1% increase in baseline payments to MA plans. As a reaction to this, several groups including the Better Medicare Alliance (BMA), the American Action Network and America’s Health Insurance Plans (AHIP) went into full attack mode, launching lobbying efforts that included a Superbowl ad of seniors at their weekly bowling league stressing over the pending cuts to their Medicare. The ads were intended to apply pressure to Democrats defending key Senate seats in the nation’s capital, Arizona and Nevada.
The pressure seemed to work. Changes to coding and billing practices will now be phased in over a three-year period, delaying the full impact of payment cuts and giving MA payers more time to lobby further. In addition, the baseline payments were increased from 1% up to 3.2%. At a time when the gross margins for MA payers are significantly higher than for other lines of business, it appears that those margins are set to increase further. On the day after the announcement, payers that are heavy in the MA market saw their stock prices rise sharply. UnitedHealth Group, the largest Medicare Advantage provider, saw its stock soar 3.5 percent following Wednesday’s CMS announcement, while Humana’s stock rose 2.5 percent.
So is Medicare Advantage an advantage for Americans? Well, it depends on what perspective you take. For the Medicare beneficiary, it seems to be a win. Most plans are zero premium, they provide a wide variety of benefits not available in traditional Medicare, and out-of-pocket costs are capped. And if you are a payer in the MA space, it’s a big win given the profitability of these plans. But for the taxpayer and the future Medicare beneficiary, there are concerns. MA plans have an estimated 12% overhead vs. just 2% for traditional Medicare and reforms intended to create more appropriate spending are now delayed. And that is even more relevant as the Medicare hospital trust fund is predicted to be insolvent by 2031. New projections show that after 2031, the fund’s reserves will only have enough to pay 89% of total scheduled benefits. Congress will need to act to strengthen both Medicare and Social Security, and the most recent delay of changes seems to be a step further away from that goal.
