Medicare Advantage (MA) penetration has reached as high as 70 to 80 percent in some markets, a hospital administrator tells Becker’s Hospital Review in a December 4, 2025, article, but it is creating “friction” and could lead to more hospitals cancelling MA contracts.
MA plans are popular because of the “simplicity and potential cost savings” for enrollees, but there are “persistent operational and financial hurdles” for hospitals, writes Alan Condon.
“These range from rising denial rates and prior authorizations to delayed or insufficient reimbursements,” wrote Condon. “And while payers and providers navigate these clashes behind the scenes, patients are left in limbo.”
Ninety hospitals and health care systems have dropped MA contracts over the past three years, states Beckers.
‘Aggressive’ Approach
The Mayo Clinic, based in Rochester, Minnesota, has ended contracts with most Humana and UnitedHealthcare MA plans starting January 2026, reports Becker’s.
“There’s been a significant amount of peer and network disruption in the Medicare Advantage space, and Mayo Clinic is taking a fairly aggressive approach on that front,” said Dennis Dahlen, Mayo’s Chief Financial Officer, at a recent roundtable discussion held by the publication.
“We’re being very selective about which Medicare Advantage plans we contract with — but for those that we’re not in network with, patients likely won’t be able to get an appointment unless it’s clinically significant or we can make an exception,” said Dahlen.
The Medigap Dilemma
All Medicare enrollees, whether those in MA plans or traditional fee-for-service (FFS) enroll in Part A (hospitalisation) and Part B (medical care). Hospitalization coverage is limited. MA plans cover the difference, but FFS enrollees must purchase a private “Medigap” coverage plan to protect themselves financially.
Switching back to traditional fee-for-service (FFS) Medicare may not be easy or cheap for MA enrollees, states the Medicare How-to Guide, published by the Citizens’ Council for Health Freedom.
“The Medigap Open Enrollment Period is a one-time open enrollment period,” states the Guide. “You will not be required to go through medical underwriting if you enroll during these first six months. No health questions will be asked, no medical records will be required for review. However, as Medicare.gov warns, ‘after your Medigap Open Enrollment Period ends, you may not be able to buy a policy.’”
Sellers’ Market?
“As hospital systems consolidate, they are increasingly able to demand higher fees from health plans,” said Devon Herrick, a health care economist, who posts at the Goodman Institute Health Blog.
“Private insurance pays hospitals about double the rates paid by Medicare,” said Herrick. “Dropping MA plans is probably a negotiating tactic to get higher fees and possibly less scrutiny of care and upcoding. Threatening to drop MA plans may also be an attempt to get them to back off.”
There is a conflict between MA plans and hospitals, says John C. Goodman, the president of the Goodman Institute for Public Policy Research and the co-publisher of Health Care News.
“Because MA plans are managed by private companies, they have more incentive than the government to be more efficient in spending, something that hospitals may not like,” Goodman told Health Care News in December 2025.. “Ultimately, this saves taxpayers money.”
Needed Reform
Congress can enact several reforms to make MA better, says Goodman. “There should be a ‘right of return,’ meaning people should be able to return to traditional Medicare with no financial penalty,” said Goodman.
MA plans have also been under attack in recent years. “Since the program was originally a bipartisan creation, you would think that politicians in both parties would openly brag about the program and claim credit for it,” wrote Goodman, on November 18, 2024, on the Goodman Institute website.
Goodman says recent “slashed payments’ to MA plans by the Biden administration has caused “some MA plans to leave the market altogether and others to reduce the benefits they offer.”
AnneMarie Schieber ([email protected]) is the managing editor of Health Care News.
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland’s monthly newspaper for health care reform.
