Medicare Advantage Margins Recover as Automation Reshapes Risk Pools

Following a tough 2024, Medicare Advantage margins are rising again as automated analytics and payer consolidation realign operational models for sustained profitability.

After a turbulent 2024 marked by margin compression and regulatory tightening, Medicare Advantage (MA) plans are beginning to rebound. Industry forecasts from McKinsey & Company project that MA profitability will reach 3–3.5% by 2028, driven by a twin strategy: widespread automation and increasing payer consolidation. This recovery is being strategically engineered—not simply market-driven. Health insurers are embedding AI-powered automation across core operations, using predictive analytics, advanced risk stratification, and real-time claims processing to tighten control over cost structures. By automating key workflows—such as enrollee risk adjustment, provider benchmarking, and claims adjudication—MA plans are redefining how they manage both care delivery and administrative efficiency.

The shift comes amid mounting oversight from the Centers for Medicare & Medicaid Services (CMS), particularly regarding coding integrity and risk score inflation. As the agency sharpens its focus on audit protocols and adjusts Star Ratings, payers are leveraging machine learning to detect discrepancies early, ensuring compliance while protecting revenue. Automation is also yielding returns in labor reduction and accuracy enhancement. By minimizing manual tasks and improving coding precision, insurers are recapturing lost margin and positioning themselves for long-term sustainability in a volatile policy environment.

However, challenges remain. Future rule changes around risk adjustment and rate-setting could reshape margin outlooks yet again. Additionally, as automated systems become central to MA strategy, ethical governance and workforce reskilling are now critical to avoid algorithmic bias—particularly in serving increasingly diverse senior populations. What’s evident is a turning point: Medicare Advantage is becoming a high-tech, data-driven enterprise, where profitability will rely as much on digital infrastructure as on traditional actuarial models. For insurers and financial stakeholders with healthcare exposure, aligning with this new automation-first paradigm is no longer optional—it’s imperative. The insurers who successfully harness automation today are poised to lead tomorrow’s senior care economy. Those who lag may find themselves outpaced in a rapidly evolving, precision-driven market.