Policy Of Auto-Enrolling Seniors In Medicare Advantage Could Backfire

The Trump administration is evaluating the possibility of automatically enrolling new Medicare beneficiaries into Medicare Advantage plans or Accountable Care Organizations (ACOs). Implementing this policy could lead to increased federal expenses and impose stricter care access requirements for seniors and disabled individuals, including prior authorization and limited physician and hospital networks.

Chris Klomp, director of Medicare, expressed to STAT News that auto-enrollment in Medicare Advantage could be more beneficial than the current system of default enrollment into traditional Medicare. However, this view is contentious. In March, the Medicare Payment Advisory Commission reported that Medicare spent $76 billion more on Medicare Advantage patients in 2025 than it would have under original Medicare. These additional costs help fund the extra benefits provided by Medicare Advantage insurers.

Although Medicare Advantage plans often offer low or no premium fees, they tend to limit choices of healthcare providers and require more frequent prior authorization, potentially restricting access to certain medications and treatments.

What’s the Difference Between Traditional Medicare and Medicare Advantage?

Medicare covers about 68 million elderly and disabled Americans. At age 65, most are automatically enrolled to cover hospital and physician costs, under Parts A and B respectively. Services in traditional Medicare are often billed separately, known as “fee-for-service.” Since 1983, reimbursement rates have been standardized based on diagnosis-related group payments for hospital stays, varying by condition.

Those in traditional Medicare can also opt for prescription drug coverage (Part D) through separate plans. Alternatively, eligible individuals can choose Medicare Advantage (Part C), where private insurers receive a fixed monthly fee from the government to cover health services, including hospital, outpatient, and physician services, often with integrated drug coverage.

Medicare Advantage plans, with their low premiums and additional benefits like vision and dental care, have seen a steady rise in enrollment over the past two decades. Currently, over 50% of eligible beneficiaries are enrolled in Medicare Advantage.

How Seniors Could Be Affected by Change in Policy

The current default is traditional fee-for-service Medicare, with Medicare Advantage available for those who choose it. The Trump administration is considering changing this default to auto-enroll beneficiaries in Medicare Advantage plans or an ACO. Once enrolled, individuals would remain in their plan for three years before having the option to switch to original Medicare.

ACOs are designed to provide coordinated care at lower costs, often for those in traditional Medicare. These Medicare beneficiaries could be auto-enrolled into ACOs participating in the Medicare Shared Savings Program, a voluntary initiative aimed at promoting cost-effective care.

It is uncertain how the Centers for Medicare and Medicaid Services would decide whether a new beneficiary would be enrolled in a Medicare Advantage plan or an ACO. Additionally, the variation among Medicare Advantage options raises questions about which plan would be the default choice. Tricia Neuman from KFF expressed concerns to MedPage about whether new beneficiaries would be placed in plans that allow them to continue seeing their preferred doctors or if they would need to switch providers.

While Medicare Advantage typically reduces out-of-pocket costs if beneficiaries stay within the network, it often limits provider choices. Original Medicare, by contrast, offers more flexibility and access to a broader range of providers.

Involuntary disenrollments are a significant concern for Medicare Advantage plan users, unlike traditional Medicare. An analysis by Johns Hopkins Bloomberg School of Public Health found that about 10% of Medicare Advantage enrollees, equating to roughly 2.9 million seniors, are being forced to find new coverage in 2026 as insurers withdraw from markets. The disenrollment rate increased from 1% in 2018-2024 to 7% in 2025, and then to 10% in 2026. In Vermont, 92% of enrollees had to find new plans or revert to original Medicare.

Although growth in Medicare Advantage enrollment has slowed, there was a slight increase in sign-ups: 34.4 million people enrolled in Medicare Advantage in 2025, up from 33.4 million in 2024. Most major insurers reduced their enrollee numbers, except Humana and Kaiser Foundation Health Plan, which saw increases of 1.3 million and 64,000 beneficiaries, respectively.

How Could the Administration’s Changes Affect Medicare Advantage Plans?

Medicare Advantage plans are currently facing challenges from rising medical costs and increased use of healthcare services. The Inflation Reduction Act’s redesign of the outpatient drug benefit also adds to cost liabilities, particularly for high-cost beneficiaries.

To help Medicare Advantage plans cope, CMS has implemented various regulatory measures, including increasing payments to insurers and easing regulations. CMS approved a 2.48% payment rate increase for 2027, significantly higher than the initially proposed 0.09%. This translates to a $13 billion increase in federal payments to private insurers managing health plans for seniors and some individuals with disabilities, aiming to help insurers stabilize amid rising costs.

Last year, CMS announced a 5.1% payment increase for 2026, amounting to a $25 billion boost, contrasting with the Biden administration’s proposed 2.2% increase. Additionally, CMS loosened regulations for the star ratings system, removing 11 quality metrics, which could generate nearly $19 billion in bonuses for insurers over the next decade.

With the potential shift to making Medicare Advantage or ACOs the default choice for new beneficiaries, this administration seems inclined to expand the Medicare Advantage market. This aligns with Project 2025, a conservative policy blueprint. Before becoming CMS administrator, Oz expressed support for a Medicare Advantage for All system, hinting at its potential as a model for broader healthcare reform.