Through over-reimbursement and under-reimbursement, Medicare Advantage — the first real “retail” health insurance market of scale — has consistently penetrated the Medicare marketplace over the past 20 years. And it shows no sign of slowing down.

For payers, that means finding ways to drive growth of their Medicare Advantage offering. For providers not already contracting with Medicare Advantage, it’s time to bite the bullet and either figure out an effective business model or consider launching their own plan. For investors, this is a macro trend and as such, a long-term opportunity.

To be sure, the penetration rise has been measured at just 1.5 percentage points per year over the past 10 years. But accounting for recent trend and other market dynamics, L.E.K. Consulting’s proprietary county-level projection model shows Medicare Advantage enrollment rising from roughly 20 million, or 35% penetration, at the end of 2017 to approximately 38 million, or 50% penetration, by the end of 2025. Nor will it stop there.

In this Executive Insights, we make the case for why we believe Medicare Advantage’s march forward will continue apace until its penetration rate hits 70%.

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