What Benefits Drive Membership in Medicare Advantage Plans?

TL;DR

This study identifies key benefits influencing Medicare Advantage Plan membership using a multinomial Lasso model on data from New Jersey, revealing that certain plan features and financial terms significantly impact market share.

Contribution

It applies a multinomial Lasso approach to analyze benefits affecting Medicare Advantage Plan market share, highlighting the importance of financial terms and specific plan features.

Findings

Financial terms like deductibles and copays are linked to higher market share.

Brand reputation and plan type (PPO) influence membership levels.

Ancillary benefits have minimal impact on market share.

Abstract

We seek to identify the most relevant benefits offered by Medicare Advantage Health Plans that drive membership and market share. As an example, we explore plans operating in a single county in New Jersey between 2018 and 2023. A dataset of benefits from publicly available data sources was created and the variance inflation factor was applied to identify the correlation between the extracted features, to avoid multicollinearity and overparameterization problems. We categorized the variable Market Share and used it as a multinomial response variable with three categories: less than 0.3\%, 0.3\% to 1.5\%, and over 1.5\%. Categories were chosen to achieve approximately uniform distribution of plans (47, 60, and 65 respectively). We built a multinomial Lasso model using 5-fold cross-validation to tune the penalty parameter. Lasso forced some features to be dropped from the model, which reduces the risk of overfitting and increases the interpretability of the results. For each category, important variables are different. Certain brands drive market share, as do PPO plans and prescription drug coverage. Benefits, particularly ancillary benefits that are not part of CMS's required benefits, appear to have little influence, while financial terms such as deductibles, copays, and out-of-pocket limits are associated with higher market share. Finally, we evaluated the predictive accuracy of the Lasso model with the test set. The accuracy is 0.76.