Medicare spending on seniors is set to expand rapidly and Special Needs Plans (SNPs) may provide one avenue for Medicare Advantage plans to control spending by reducing hospitalizations. While they've grown rapidly in the past few years they remain unevenly distributed across states, counties, and health plans. We wanted to know:

Our questions

1. How much low-hanging opportunity is there for SNP expansion?
2. How much could Medicare Advantage plans save by avoiding hospitalizations through better member management in SNP models?

What we found

1. If SNP enrollment increased to 20% of total Medicare Advantage enrollment in counties below that rate, and stayed flat in counties above, we would see an additional 2.2M enrollees coming from other Medicare Advantage plans, or 48% growth.
2. An additional 2.2M enrollees could save Medicare Advantage plans $295M in avoided hospitalizations

What it means for you

SNP growth remains an opportunity for Medicare Advantage plans to produce better outcomes for their members while lowering hospital costs for themselves. One of the biggest barriers to SNP growth is awareness: many brokers and most seniors are not familiar with the product, while plans struggle to identify eligible members.

Operators in rural areas face additional challenges. Lower population density and greater barriers to managing social determinants of health create logistical and clinical challenges to delivering the required highly coordinated care model for members.

Based on our research and analysis, we have four recommendations:

1. Work with local providers and brokers to raise awareness

Plans will need to work directly with local providers and brokers to show the impact SNP expansion could have for patient populations. This is particularly important for C-SNP operators, who benefit neither from a pre-existent list of potential members (as D-SNP operators have from state Medicaid rolls) nor from a geographically concentrated population (as I-SNP operators do).

2. Partner for data and logistics to facilitate rural expansion

Innovative plans—particularly D-SNP operators—have had success in this environment by paying close attention to data coordination among their third-party partners, relying on telemedicine as much as possible (including telepharmacy) and providing transportation services to their members.

3. Focus on SNP enrollment for new MA beneficiaries

Currently, bonus payments per enrollee are lower for SNP plans than other MA plans. That means that the primary financial opportunity in transitioning MA patients to SNP plans comes from reducing hospitalizations, rather than bonuses from CMS. For beneficiaries aging into Medicare eligibility or current fee-for-service beneficiaries, plans can benefit from both savings from reduced hospitalizations and individual bonuses.  

4. Don't let expansion distract from impact

While expansion creates a promising business opportunity, plans will only realize the $295M in estimated savings if they can maintain—or even improve—the impact that the SNP care model has on patients.

What we did

To estimate market size, we broke down current SNP enrollment rates as a proportion of Medicare Advantage members in each county of the U.S., including Puerto Rico. We found that the 75th percentile proportion was 20%.

We then calculated how many more members would be covered by SNPs if each county with an enrollment rate below 20% reached that level, and each county above that level experienced no further growth.

The total represented what we considered feasible enrollment growth. That's an aggressive estimate for some markets—for example, we don't expect rural areas with few providers and large geographies to grow as quickly. But it's also conservative in others; nearly a third of new MA enrollees enrolled in SNPs in 2022, far exceeding rates in individual and employer or group plans.

We expect that those differences will roughly even out at national level. We also held constant the distribution of enrollees in each SNP model.

We then found literature on the impact of each SNP model on hospitalizations:

• Dual-eligible SNPs: 3% reduction in hospitalizations compared to other MA plans
• Chronic disease SNPs: Between 10% and 30% reduction in hospitalizations compared to other MA plans. For our analysis we used a rate of 20%.
• Institutional SNPs: 38% reduction in hospitalizations compared to Medicare fee-for-service.

This represents our biggest assumption. There is still limited evidence on the impact of SNP enrollment on beneficiaries—we took these values for granted and assumed that expansion would maintain this level of impact in new areas or with new patient populations.

We extrapolated each of these impacts on the newly enrolled population, assuming a baseline hospitalization rate of 0.22 admissions per person, which we calculated from Medicare's Standard Analytical File for 2019.

SNP Heatmap

Medicare Advantage Special Needs Plans (SNPs) are the fastest growing MA product on the market--but are spread unevenly across the country. Many factors affect how much SNPs might grow on a local level: population density, geographic space, state Medicaid enrollment rules, and more. Nevertheless, we mapped out SNP enrollment as a proportion of all Medicare Advantage beneficiaries to identify expansion opportunity.

Use the map below to see how much room for growth exists for SNPs in your county.