Fighting Insurers, Hospitals Offer Their Own Medicare Advantage Plans

Editor’s Note: This story is from KFF Health News.

Ever since Larry Wilkewitz retired more than 20 years ago from a wood products company, he has had a commercial Medicare Advantage plan from the insurer Humana.

But two years ago, he heard about Peak Health, a new Advantage plan started by West Virginia University Health System, where his doctors work. It was cheaper and offered more personal attention, as well as extras such as a pharmacy fee. Those benefits are more important than ever, she said, now that she’s being treated for cancer.

“I decided to give it a shot,” said Wilkewitz, 79. “If I don’t like it, I can go back to Humana or whatever in a year.”

Stick to Peak Health. Members of Medicare Advantage plans, which are a private alternative to the government’s Medicare program, can change plans through the end of March.

Now entering its third year, Peak Health has tripled its enrollment from last year, reaching “north of 10,000,” said Amos Ross, its president. It grew from 20 counties to 49, he said, moving into western Pennsylvania for the first time.

Although hospital-managed plans are only a fraction of the Medicare Advantage market, their enrollment continues to grow, reflecting the overall increase in Advantage members. Of the 62.8 million Medicare beneficiaries eligible to join Advantage plans, 54% signed up last year, according to KFF, the non-profit health information provider KFF Health News.

While the number of Advantage plans owned by hospital systems has stabilized, Mass General Brigham in Boston and others are expanding their service areas and types of plan offerings.

Health plans have been in the insurance business for years, but not for everyone. MedStar Health, which serves the greater Washington, DC area, said it will close its Medicare Advantage plan at the end of 2018, citing financial losses.

“It’s a lot of work,” said Ross, who spent more than a decade in the health insurance industry.

Like any other health insurance company, hospitals going into business need the back-end infrastructure to enroll patients, register providers, fill prescriptions, process claims, hire staff, and – most importantly – assure state regulators that they have the funds to pay claims.

Once they receive a federal insurance license, they need approval from the federal Centers for Medicare & Medicaid Services to sell Medicare Advantage policies. Some systems work with or build an insurance company, while others do most of the work themselves.

Kaiser Permanente, the nation’s largest not-for-profit health plan by revenue, started the Medicare pilot program in 1981 and now has nearly 2 million people enrolled in multiple Advantage plans in eight states and the District of Columbia. The Department of Justice announced Jan. 14 that KP agreed to pay $556 million to settle allegations that its Advantage plans fraudulently billed the government about $1 billion over a nine-year period.

Last year, UCLA Health launched two Medicare Advantage plans in Los Angeles County, the most populous county in the United States. Some new hospital systems have emerged in less profitable rural areas.

“These are communities that have been very difficult for insurers to get into,” said Molly Smith, vice president of the public policy group at the American Hospital Association.

But Advantage plans offered by hospitals have a familiar, trusted reputation. They don’t have to move to the city, because their owners – the hospitals – never left.

A Bad Breakup

Medicare Advantage plans generally limit their members to a network of doctors, hospitals, and other doctors that have contracts and plans to help them. But if hospitals and plans can’t agree to renew those contracts, or when disputes arise — often caused by payment delays, denials, or burdensome pre-authorization rules — health care providers can quit.

These splits, along with planned layoffs and reductions in service coverage, forced more than 3.7 million Medicare Advantage enrollees to make a difficult choice last year: get new insurance by 2026 that their doctors accept or, if possible, keep their plan but find new doctors.

About one million of these needy patients received coverage from UnitedHealthcare, the nation’s largest health insurer. In a July earnings update for financial analysts, Chief Financial Officer John Rex blamed the company’s withdrawal from hospitals, where “more meetings are becoming more service-intensive and costing more.”

Chaos in the commercial insurance market has upset patients and their providers. Sometimes contract disputes have been fought openly, with anxious patients receiving warnings from each side accusing the other of an imminent end.

When Fred Neary, 88, learned from his doctors at the Baylor Scott & White Health system in central and north Texas that he would be leaving his Medicare Advantage plan, he feared the same thing might happen if he joined a plan from another commercial insurer. Then he discovered that the 53-hospital system had its own Medicare Advantage plan. He signed up in 2025 and is keeping the program this year.

“It was very important to me that I never have to worry about switching to another program because they would not accept my doctors at Baylor Scott & White,” he said.

Eugene Rich, chief executive of Mathematica, a health policy research group, said Medicare Advantage hospital plans offer “a lot of stability for patients.”

“You’re not going to suddenly find out that your primary care physician or your cardiologist is no longer in the program,” she said.

A Health Affairs study co-authored by Rich in July found that enrollment in Advantage plans run by hospital systems grew faster than enrollment in traditional Medicare for the first time in 2023, though not as fast as the overall increase in enrollment in all Advantage plans.

The large UCLA Health system is launching two of its Medicare Advantage plans in Los Angeles County in January 2025, though patients already have a list of more than 70 Advantage plans to choose from. Before launching the program, the University of California Board of Regents discussed its merits at a meeting in November 2024. Minutes of the meeting provide rare insight into the discussion that private hospital systems often hold behind closed doors.

“As increasing numbers of patients enrolled in Medicare are turning to new Medicare Advantage plans, UC Health’s experience with these new plans has not been positive, either for patients or providers,” the minutes read, summarizing the comments of David Rubin, senior vice president of UC Health.

The minutes also detail the comments of Jonathon Arrington, CFO of UCLA Health. “Over the years, in order to provide care for Medicare Advantage patients, UCLA has entered into numerous contracts with other payers, and these contracts have often not been effective,” the minutes read. “Every two or three years, UCLA finds itself terminating a contract and signing a new one. Patients have remained loyal to UCLA, some canceling contracts three times to stay with UCLA Health.”

Cost to Taxpayers

CMS pays Advantage plans a set monthly amount to care for each enrollee based on the member’s health status and location. By 2024, the federal government paid Advantage plans an estimated $494 billion for patient care, according to the Medicare Payment Advisory Commission, which monitors the plan for Congress.

The commission said this month it plans to pay insurers by 2026 14%, or about $76 billion, more than it would cost federally run Medicare to care for the same patients.

Many Democratic lawmakers have criticized the overpayments to Medicare Advantage insurers, although the program is supported by Congress due to the growing popularity of Medicare beneficiaries, who are often attracted to dental care and other coverage not available through traditional Medicare.

Whenever Congress threatens cuts, insurers say these open government payments are essential to keeping Medicare Advantage plans afloat. UCLA Health’s Advantage plans will need at least 15,000 members to be financially sustainable, according to meeting minutes. CMS data shows that 7,337 patients registered in 2025.

A study published in JAMA Surgery in August compared Medicare Advantage patients who underwent major surgeries with those covered by their own hospital-managed Medicare Advantage plans. The latter group had a few problems, said co-author Thomas Tsai, an associate professor in the Department of Health Policy and Management at the Harvard TH Chan School of Public Health.

Smith, of the American Hospital Association, isn’t surprised. When insurers and hospitals aren’t on opposite sides, he said, delivery of care can be easier. “There’s more flexibility in managing premium dollars to cover services that otherwise might not be covered,” Smith said.

But Tsai cautions seniors that hospital-run Medicare Advantage plans operate under the same rules as those operated by commercial health insurance companies. He said patients should consider whether the additional benefits of Advantage plans “are worth the trade-off for potentially smaller provider networks and more utilization management than they would get from traditional Medicare.”

In Texas, Neary hopes that the close relationship between his doctors and his insurance plan means there is less chance of his health care bills being charged back.

“I don’t think I could get into a situation where they wouldn’t offer help if one of their doctors recommended something,” she said.

KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of the active programs at KFF—an independent source for health policy research, polling, and journalism. Read more about KFF.