Insurers offering Advantage plans have an enormous financial interest in your Medicare choice, but what they won’t tell you can make a huge difference in your pocketbook and treatment options.
If you are nearing 65, you’ve doubtless heard about the many benefits of choosing a Medicare Advantage plan. Medicare Advantage is administered by private insurance companies, not the federal government, and they want you to join. This is not for altruistic reasons; they get paid enormous sums for their efforts. And they are quite successful; more than 40% of seniors 65 and older are on a Medicare Advantage plan.
Chumming the Water
“Chumming” is the practice of throwing cheap baitfish and fish guts into the water to attract big, high-value gamefish. Medicare Advantage lures in customers with low or no additional premiums (everyone pays a premium for Part B) and a variety of benefits not offered through Medicare. You may see dental, vision, or hearing assistance, but caveat emptor. Buyer beware, indeed. The vision benefit may be $100 every other year for eyeglasses, and dental may only cover routine cleanings.
Advantage plans also might cover gym membership, home improvements such as wheelchair ramps, transportation to doctors’ offices, and even meal delivery. These are all valuable services to you and to your Advantage plan insurer. In this case, both of you have a common goal of keeping you healthy and able to continue living in your residence. The benefits are obvious for you, and all about financial gain for your insurer.
Advantage May Destroy MedicareMedicare Advantage plans are not Medicare. These private health insurance plans proliferated after the passage of the Medicare Modernization Act of 2003, and they operate on much looser rules than those required for Medicare. The companies operating them do not get paid on a person-by-person, procedure-by-procedure basis, but instead get a huge lump sum based on the aggregate risk score of all their enrollees. They are thus incentivized to deny authorizations and procedures while making clients look sicker on paper. A 2014 report by the Center for Public Integrity entitled, “Why Medicare Advantage Costs Taxpayers Billions More Than It Should” found that risk scores rose twice as fast for people who joined a Medicare Advantage health plan as for those who didn’t, costing taxpayers an estimated $36 billion between 2007 and 2011. The National Bureau of Economic Research recently found that “Medicare Advantage insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending for enrollees in MA is 25 percent lower than for enrollees in [traditional Medicare] in the same county and [with the same] risk score.” However, the Centers for Medicare and Medicaid Services is doing virtually nothing to stop these abuses, auditing few cases and settling five of them in 2007 for a paltry $1.3 million. Why? Their employees know that plum jobs await at for-profit insurers if they don’t rock the boat. Presidential administrations are aware that health insurance executives are known to be generous contributors to political campaigns. Read more about these abuses. |
Some Advantage plans have created a service dubbed “Papa Pals,” wherein the insurer sends a worker to a plan member’s home to “mop floors, clean dishes and help with computer problems” for two hours a week. Sound like a dream benefit? Yep, that is what the insurer thought. And while it can counteract social isolation, these workers are also trained to collect more funds from Medicare by urging members to get annual wellness exams, fill out health risk assessments, and obtain health screenings. What’s so bad about that?
Nothing, except members may self-report issues that get the insurance companies higher reimbursement rates from Medicare. The companies may also be able to lift their star ratings based on performance measures to get bonuses from Medicare. These bonus payments have been rising, from about $5.8 billion in 2017 to double that in 2021. The self-reported health risks also contribute billions to company coffers via extra Medicare payments.
Insurance Agent Premiums
Insurance brokers can get higher initial commissions for selling a Medicare Advantage plan than for traditional Medicare. For instance, broker Stephen O’Brien in Augusta, Maine is paid $573 for selling an Advantage plan versus about half that for original Medicare. He says it does not influence how he presents the options.
Coverage
Medicare Advantage plans are based in a specific area. They may have providers only in your state, only in your county, or only, in some rural areas, 100 miles away from you. It is extremely important to ask where providers are located for both basic and specialty care. You will have to use doctors in the network, which may vastly limit your options. Many people buy a particular Advantage plan not realizing that doctors with whom they’ve established long relationships are not available in that network. And if you travel much or have a second home, your network does not travel with you; you will pay out-of-network charges. When you are outside of the US, Advantage plans offer zero coverage, and do not include a provision for paying some of the costs to get you back to the US for treatment as original Medicare plus Medigap do.
Furthermore, Advantage plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). You will likely be required to get a referral to see a specialist, and treatment can be denied. In addition, you must pay a copay each time you see a doctor or specialist. The US Department of Health and Human Services (HHS) released a report in April that found Advantage plans inappropriately deny required care to tens of thousands of enrollees every year.
An American Medical Association survey in 2021 discovered that 34% of doctors contacted reported that a prior authorization led to hospitalization, medical intervention to prevent permanent impairment, or even the disability or death of at least one of their patients. This has led to legislation aimed at streamlining Advantage programs in California.
“It has become common practice for health insurance companies to create obstacles for patients, in hopes of not having to pay for essential health care,” says California Medical Association President Robert E. Wailes, M.D. “The reason for these types of obstacles is simple: Fewer procedures performed translates to larger insurance company profits.”
Check Every Year
Your Medicare Advantage plan can change services and costs every year, so be prepared to run the numbers annually versus other plans. The yearly enrollment period (Oct. 15 to Dec. 7) is homework time. And while you can change Advantage plans every year, woe be to you if you want to switch to original Medicare.
When you first sign up for Medicare, you can get a Supplement (Medigap) policy regardless of preexisting conditions. But that is a one-time offer. After that initial pass, you can be denied based on your health forever after.
Let’s say you are in good health at age 65 and opt for an inexpensive Advantage plan. Then, a few years later, you are diagnosed with cancer. You would like to be treated at a specialized facility, but none in your area is covered by your Advantage insurance. And every test, every treatment, every doctor requires a copay. You quickly hit the $7,550 maximum out-of-pocket for your plan, but that starts over in January when you find out you need additional treatment. Why not switch to original Medicare with a Supplement that will cover nearly all your costs? You can’t because your cancer diagnosis gets you rejected.
Cost
Advantage plans are less expensive than original Medicare with a Medigap policy. When you’re 65, that alone can be enough to make your decision. Who doesn’t want cheaper health care? But Advantage plans come with a vast array of copays that can make you feel nickel-and-dimed and may even keep you from seeing a doctor when you should.
For people who stay relatively healthy throughout their life, Advantage plans can save money and provide good care. But for those who travel throughout the US, who get a devastating diagnosis, who want to choose their own doctors and specialists in a timely manner, who want to buy one policy that will stay the same — original Medicare and a Supplement are hard to beat.
Sources:
Blog posting provided by Society of Certified Senior Advisors
