Health Care Reform and Medicare Advantage

Yesterday, a reader named Fran left a comment asking about what happens to Medicare Advantage plans if/when health care reform is passed. (We're going to get a bit wonky now, but not too much.)

If you are unfamiliar with Medicare Advantage, they are essentially private Medicare, also referred to as Part C. In addition to the coverage available with traditional Medicare, some add coverage for dental and vision care, which traditional Medicare does not, and prescription drug coverage (Part D in traditional Medicare) is usually available. Even gym memberships may be covered. Elders who buy these plans pay one premium to the private insurance company.

With traditional Medicare, it is a bit more complicated. Part A, which is free, covers most hospital charges. Part B, which covers physician fees and many general medical needs, is optional although most elders purchase it. The premium, currently at $96.40 per month, is usually deducted from one's Social Security benefit.

Many people also purchase Medigap policies, supplemental insurance to cover the holes in original Medicare. And there is Part D, available from private insurers, for prescription drugs, a faulty system remedied to a degree with most health care reform bills that are on the table.

Anyone 65 and older probably knows all this. Here are some things you may not know about Medicare Advantage plans:

The federal government pays a subsidy to private insurers who offer Advantage plans, an amount that averages 14 percent per patient above what traditional Medicare pays. Since 2003, those extra payments (a giveaway) to private insurance companies are estimated to have cost $44 billion dollars and will increase over the coming years as more people join Advantage plans, especially when the oldest baby boomers become eligible for Medicare in 2011.

Even so, some services covered by traditional Medicare may not be covered by Medicare Advantage plans. Some plans exclude certain cancer drugs or mental health services or home health care expenses, or not cover them at all. And some services may be excluded from counting toward the annual out-of-pocket-expenses cap – if the plan has a cap; not all do.

One of the ways the several reform bills would cut health care costs is to reduce or eliminate the subsidies to private Medicare Advantage insurers. Reading the formulas will make your brain hurt so I'm not going to even try to explain them. The point is that the subsidies, as currently laid out in the reform bills and which President Obama has endorsed, will be reduced or cut and people like Fran with Advantage plans are worried about what that means to them.

Will insurers increase premiums? Will they cut services? No one knows. They, of course, cannot reduce services below what is available through traditional Medicare. So it appears to be a wait-and-see proposition.

Personally, I would like to see Medicare Advantage eliminated (it won't happen) for one big reason: there is no advantage except to increase profits to private insurers. In addition to those subsidies, to which all taxpayers contribute, Advantage plans remove 23 percent of the 45 million people now using Medicare from the traditional system reducing the risk pool and siphoning off premiums into the excessive salaries of insurance company executives.

So if health care reform passes with reductions or elimination of Advantage plan subsidies, some insurers may drop the coverage or increase premiums. But there is an easy remedy: join traditional Medicare.

And if you think your health care would suffer, re-read this Reflections column from Saul Friedman about his treatment for a stroke and esophageal cancer under traditional Medicare.

Another Bad Reform Idea
New York Democratic Senator Chuck Schumer yesterday announced a twist in the public option debate: an “opt-out” plan. A public option would be included in a health care reform bill, but states would be allowed to opt out.

Oh, yeah, that would work – if you believe state politicians are any less in the pocket of insurance companies than U.S. Congress members. There is more on this at Huffington Post.

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At The Elder Storytelling Place today, Nancy Leitz, Tabby to the Rescue

Comments

[Nan]

I agree 100% with your comments. Medicare Advantage is really only an advantage for the insurance companies.

Medicare Advantage plans work well for people who are healthy and for some who live in large urban areas where there are long-established plans such as certain HMO's. However, the private fee for service plans in particular are deceptive at best, as providers can opt out from treating people with certain plans at any time, unlike HMO's which are yearly contracts with providers.

A person can always return to traditional Medicare, but it's not always possible to get into a good Medicare supplement, particularly if a person's health has deteriorated. But the Medicare Advantage plans may leave a person subject to a lot of high co-pays or co-insurance just when they need their coverage the most and are least able to pay those amounts (and least able to negotiate their plan to be sure they are being charged appropriately).

The subsidies also mean that everyone in Medicare pays extra so that some people can visit the gym.

[Paula]

Thanks for the timely post, Ronni. I blogged on Birds on the opt-out issue last week, when I learned that several states had initiated changes to their constitution that would allow residents to opt out of a federally mandated health insurance program.
Personally, I think the practice would be catastrophic for individuals, as well as for the country. First of all, allowing people to opt out encourages irresponsibility. Will that same state bail out loners when they run up huge bills? Second, what about children? If a parent opts out of mandatory health insurance, I would think he or she could be charged with child neglect.

[Rain]

We got a medicare advantage when we signed into medicare because in Oregon, and some other states like Minnesota, the fees they pay doctors are lower than other states due to these states being more cost efficient. They are then penalized. How does that work for the people in Oregon, how about driving 50 or more miles to find a doctor who will take Medicare alone. We pay the same premium or close to it that we paid when we were in the HMO that we rolled into the Advantage plan. We did that to keep our doctor and insurance benefits as they have been. IF they cut the fees further that they pay doctors to pay for the new insurance coverages, there may be more people finding their choices of physicians severely limited. I don't know how that will work but as it stands no doctor has to take Medicare patients (as I understand it).

Personally I favor the public option or even single payer which doesn't have a chance and last night I heard neither does the public option. I would be willing to pay more, to see benefits for elders reduced to get coverage for younger people improved but if all this amounts to is more money for insurance companies (and that is what it looks like it is going toward); then I am going to be really angry at Congress-- both parties and the president.

We watched Sicko the other night and if you have yet to see it, I very highly recommend it. Michael Moore can be hard to take but he did a good job with this one showing the families suffering with our current system, laying out the background for how we got here, and then going to Canada, England and France to ask real people there about their coverage. It is a disgrace that our country has gotten itself into the situation it is because it didn't have to be that way but as long as Congress lets the insurance companies call the shots, as long as they are given big money from those lobbyists, it will stay this way AND insurance is probably only the tip of the iceberg for what is rotten in our government. We should be ashamed.

When I started watching Sicko, I thought what have I done as it's not like I don't see these tragic stories too many places, but I kept with it and it got easier to take. It is going to take Americans being angry and at our Democrats and Republicans if we hope to see change. Vote them out if they don't do what is best for the American people. To live with what too many Americans must (insured or uninsured) is just plain wrong.

[Hattie]

Thanks for this, Ronni. I belong to Kaiser, the managed care giant. Co-pays for doctor visits and drugs are low. Kaiser is supposed to be a non-profit and yet has been running profits, perhaps in part because of members covered by Advantage, like me and my husband.

[Judy W]

No state should have the "power" to deny their residents the public option...Some of the southern states officials refused stimulus money even though the citizens of those states were in dire need..Republicans I remember...leave Governors out of this...

[Judy W]

Many with Meidcare Advantage do not know in advance about the high co-pays, etc coming when they sign up...And then don't know how to get out...Call the phone # on the back of the medical card & request termination...but be sure you find a medi-gap coverage too.

[Rain]

We have Advantage and our copays are what they were with the HMO that it comes out of. We know how to get out of it if we wanted. That happens in November for everyone I thought but the issue is where would we find a doctor?

[Denise]

Oregon is a state where Medicare Advantage HMO have worked very well - and they save Medicare money, according to a 2009 Medpac report (Medicare Payment Advisory Commission). Here in Arizona, I'm not sure about how much money Medicare Advantage HMO's cost or save Medicare, but they are very popular. Most seniors have never known anything but Medicare HMOs here.

People who sign up for Medicare Advantage plans do know about co-pays. The details are presented and people have to sign a form that says they understand the plan details.

I am an insurance agent and I always compare Medicare Advantage plans to Medicare plus a supplement and a Part D plan.
I tell people that the most complete coverage is staying with Medicare and getting a Med Supp. But they have a choice about how to get their Medicare benefits.

People who don't think they can pay $100-$120 per month for a Med Supp choose Medicare Advantage. I am surprised whena person who could clearly pay for a Med Supp decides to go with a zero premium Medicare Advantage plan. But that's their choice.

[Denise]

As an insurace agent I wish everyone had 100% coverage, which is what they get with a Medicare Supplement Plan F. But if someone goes with just Medicare, they can end up with huge medical bills.

I got a call from a man in Bullhead City, AZ, which is out in the northwest corner of Arizona and sparsely populated. This man gets $1100 per month from Social Security to live on and he gets help with his drug costs for Part D because of his limited income. But he does not qualify for Medicaid.

He has Medicare and ended up in the hospital recently for a liver problem. After a week in the hospital, which included many tests, he said he was given a bill for thousands of dollars. Medicare has $1,068 deductible in its Part A hospital coverage, but all the doctors and tests have a 20% co-insurance because they come under Part B of Medicare.

Now that this man is out of the hospital, he needs further tests and treatment, but he has been told that, unless he can come up with 20% of the cost, the providers will not take care of him. (Michael Moore should film him!)

If this man had a Medicare Advantage plan, his hospital co-pay would have been around $1,000. No 20% charges. He could go to a specialist for a co-payment of about $40 (depending on his plan)and he would not be refused treatment. So how bad is Medicare Advantage for this man?

Medicare Advantage is not perfect but it's better than only having Medicare.

[joared]

I just lost a long comment here -- it's too late and I'm too tired to compose again. I will say that I definitely agree Medicare Advantage, overall, is a giveaway of taxpayers monies to insurance companies and should be eliminated. A new health care plan and even Medicare should be reformed to meet the needs of any of those individuals (not the insurance companies) adversely impacted by its demise.

[Denise]

AFter a call from a client on Friday evening I have another Medicare Advantage story. Kathy is 75 and lives on $945/month from Social Security, which is about $20 over the limit for Medicaid.

If she had Medicaid she would be "dual eligible" and Medicare would pay 80% of her bills and Medicaid would pay the rest. She makes too much money for Medicaid but too little to afford a Medicare Supplement. So she is enrolled in a Medicare Advantage plan that is offered in Arizona for people who earn less than $1200 per month. With this plan there are no co-pays for doctor visits, hospital stays or tests.

Kathy has been ill for months and has had lots of tests and visits to specialists to try to figure out what is wrong with her. She called me to ask if she could go to the Mayo clinic in Phoenix while she is on this plan. I had to tell her that she could not because they are not in the network.

I told her she could switch back to Medicare at any time because of her low-income status. But then I realized that, if she goes back to Medicare, she is responsible for 20% of all bills. And, most doctors and labs won't treat her unless she puts her 20% up front.

Kathy is suffering and scared about her health, but she loves her doctor, who seems to be trying to find the cause of Kathy's problems. Most of the doctors and all of the hospitals here in Tucson, AZ are in her Medicare Advantage network, so I think she has access to very good care. But I told her she can decide to change her coverage if she wants.

I called Kathy back on Saturday to talk some more and I told her about the risk she would take if she only has Medicare. I suggested she get counseling from our local Council on Aging as I don't want to be the only person advising her about such an important decision.

My real point here is that Kathy is better off in her Medicare Advantage plan than she would be on just Medicare. Without a supplement, Kathy would be refused services (except in an emergency) and she could end up with huge medical bills if she gets service.

I know here are some good arguments against Medicare Advantage, but what are all the people in Kathy's low-income bracket going to do without this choice for their Medicare coverage?

[Charles]

In our area in so. cal. many people have a medicare advantage plan and are very happy with it because they have had so much less out of pocket. 0 premiums,0 copay for Dr. visits,0 copay for specialists,0 copay for hospital stays w/no limit,0 copay for outpatient surgery,0 co pay for all labwork and tests,and exellent drug coverage. Pays for everything medicare paid for and much more including vision and dental,chiropractic and accupunture. Alot of older americans in our area will hate to lose this coverage....would be a shame!!!

[Russ Ford]

I have Medicare Advantage and have been very happy with it...very small co-pays, drug coverage, and good coverage on hospital bills...and I don't have to pay any premium at all, other than the Part B premium which I would be paying anyway. If I lose Medicare Advantage, I will have to buy a Medicare supplement, which will cost me (at the cheapest quote I've received) over a thousand dollars a year, and possibly between four and five thousand a year. Now tell me again how this is supposed to make me better off.

[Danielle]

I've been searching all day for someone who could convince me that losing Medicare Advantage is going to be a good thing for me. I'm still not convinced, but I am scared! 40% of Medicare-eligible African-Americans like myself are on Medicare Advantage plans, and we want to stay.

Before I had Medicare Advantage plan, I had to get a bunch of different plans just to be fully covered. Medigap, part A, part B, part D, and Medicaid - I had to monitor them all separately. It was very hard to find physicians who took both Medicare part B and Medicaid because it's not like anyone publishes a list. I couldn't dream of going to the gym or anything like that.

With Medicare Advantage, all of the various plans, including Medicaid, are rolled into one and administered by the same company. I can get a provider list and know that every provider takes both Medicare and Medicaid. I can join a gym and become healthier. I don't have to worry about following all the different plans, it's just one. No one preyed on me or tricked me. And if the insurers make a profit for providing this service, so what? It's not like the healthcare reform bill is going to hurt the insurers, they're still getting paid.

When healthcare reform passes, the insurers will drop Medicare Advantage rather than operate at a loss. Everyone knows this is what's going to happen. And I am not at all convinced that going back to traditional Medicare is better. In fact, I know it's not.

[Linda Hughes]

I have an advantage plan (Anthem Freedom Blue Cross (California). It is a PPO so I can go to almost any doctor or hospital for treatment. I pay 0 premiums each month & co-pay usually of $15 to dr. visit. I won't go into a lot of other details but during health situations, I've always ended up paying less than I would have if on Medicare alone. My husband is on a supplimental to Medicare & pays $167 a mo. medical & $37 mo for RX. He never owes anything after Medicare pays. If I compare the two,factoring in mo. payments, I come out ahead.If advantage goes away & I need to join a supplimental plan, it will cost me $200 a month. So, we will both pay $94 a mo. for Medicare plus $200 each for supplimental. That's about $600 a month. That's $7200 a year. Not good!!!!!!

[Reuben]

I am an insurance agent, and have enjoyed reading all the comments here. I have a lot of clients who have elected to enroll into a Medicare Advantage (MA) plan, and so far have received very few complaints. One advantage with MA is the maximum Annual Out-Of-Pocket (OOP) that a person would have to pay for their healthcare throughout the year. Once this amount is reached, their healthcare is covered completely without further cost to them (for most services). I have one particular client who reaches this OOP maximum by the end of the third month, and doesn't have to pay anything for his wife's healthcare coverage for the remainder of the year (the plan premium is $0 / month). Original Medicare doesn't have such a thing as maximum Annual Out-Of-Pocket, so this speaks for itself.