Does the racial/ethnic composition of Medicare Advantage plans reflect their areas of operation?

In 2013, Medicare beneficiaries are being offered a choice of more than 2,000 Medicare Advantage (MA) HMO and preferred provider organization (PPO) plans. As of September 2012, 27 percent of beneficiaries were enrolled in such plans, which operate in locally defined areas (Gold et al. 2012) that are proposed by the MA plans and reviewed and approved by the Centers for Medicare & Medicaid Services (CMS). While entire plan service areas are reviewed by CMS to avoid selection for particular demographic groups (2012), this review does not prevent a plan from marketing more heavily in some areas than in others or from designing benefits and/or amenities to differentially attract certain groups of beneficiaries. Medicare Advantage plans have greater participation among certain racial/ethnic minority groups of beneficiaries, suggesting that certain configurations of these benefits, marketing approaches, and amenities may result in disproportionate minority enrollment (Shimada et al. 2009). Conversely, quality-based incentive payments under initiatives such as the Affordable Care Act's Quality Bonus Payments (United States 2010) have the potential to induce MA plans to avoid enrolling beneficiaries who may be perceived as potentially lowering the plans' overall quality scores. Given the long history of poorer care processes, worse outcomes, and lower patient experience scores among some groups of racial/ethnic minority Medicare beneficiaries (Schneider, Zaslavsky, and Epstein 2002; Virnig et al. 2002; Trivedi et al. 2005, 2011; Elliott et al. 2011; Haviland et al. 2012), such programs could potentially incentivize MA plans to avoid enrolling beneficiaries from minority racial/ethnic groups. In this article, therefore, we assess the extent to which the racial/ethnic composition of MA plans reflects the composition of the local areas in which CMS has approved their operation. This allows us to understand the extent to which MA plans systematically underrepresent or overrepresent black, Latino, and Asian/Pacific Islander (API) beneficiaries in their local areas.