By NextBestFitPhase 3: Waves 2 & 3: working-age adults · Step 3.6
Create integrated care organizations (ICOs)
Years 2–4 · UHADiscuss this step
Medicare Advantage, Medicaid managed care, and integrated systems
What happens to the private plans that run Medicare Advantage (54% of Medicare) and Medicaid managed care (~75% of Medicaid)?
The plan chooses
They end. Provider-led integrated delivery systems (e.g., Kaiser Permanente's medical groups, Geisinger, Intermountain) can elect a capitated global budget as Integrated Care Organizations. Patients may choose them, but they bear no insurance risk beyond their enrolled population and cannot market extra benefits.
MedPAC estimates Medicare Advantage costs about 20% more than traditional Medicare for similar enrollees ($84B in 2025), largely from coding intensity and favorable selection. Medicaid MCO overhead is $45.5B. Integrated providers keep their care-coordination advantages without an insurance layer.
End plans; allow provider ICOs (chosen)
As described.
Pros
- +Removes $103.1B of plan overhead ($57.6B MA/Part D + $45.5B Medicaid MCO)
- +Ends coding-intensity overpayments
Cons
- −About 33 million MA enrollees lose plans many like (high satisfaction, extra benefits)
- −Plan-based care-management programs end abruptly
Keep MA-style plans as option
Private plans could take UHP capitation, as in the German sickness-fund model.
Pros
- +Choice; continuity for MA enrollees
Cons
- −Brings back risk selection, coding games, and networks
- −Two-tier experience
What this choice gives up
- MA supplemental benefits like gym memberships and grocery cards (UHP covers dental, vision, and hearing directly).
- Plan-level innovation in care management.