Making Medicare a Real Choice
What does the growth of Medicare Advantage mean for you?
Medicare is very popular and for good reason. But little by little Medicare is being privatized right now without seniors on Medicare even being aware of what the implications are.
Medicare Advantage plans, run by insurance companies, now cover about half of people on Medicare — up from only 19 percent in 2007 — and their share is expected to continue growing.
Medicare Advantage (MA) is still Medicare. It is highly regulated, government-funded and is required to offer at least the same benefits as Original Medicare. But these plans leave participants largely at the mercy of the insurance companies that run them, often with a limited network of doctors. They are a form of privatized Medicare.
If this relentless increase in participation in Medicare Advantage plans was truly by choice, it would perhaps indicate that seniors really prefer these plans. However, it is not informed consumer choice that is driving the trend, but the structure of the Medicare program itself.
When you first enroll in Medicare, you have a choice. You can choose Original Medicare and add Part D and a Medigap supplement or you can choose Medicare Advantage.
However neutrally Medicare presents the options, the finger is on the scale in favor of Medicare Advantage.
First, insurance companies are allowed to promote MA plans through direct mail, TV ads, print advertising and more. In contrast, there is no promotion of Original Medicare. There isn’t even a good name for the alternative to MA — some say Original Medicare, some say Traditional Medicare. There is literally no brand identity! But “Medicare Advantage” suggests something better than Medicare — and all the ads stress the extra benefits, the “advantage.”
And the “advantage” is the direct result of government policy. The Federal government pays the insurance companies extra (through a complex system of rebates and bonuses) which they can use for the “extra” benefits to induce enrollment.
The Medicare Advantage program was intended to save the government money based on the theory that managed care was more efficient. But it actually costs the taxpayer more than Original Medicare, which is paid directly by the government, largely because the insurance companies have been able to manipulate the amounts the government pays them.
Meanwhile, the insurance companies make a bigger profit on MA plans than on any other line of health insurance — hence the constant promotion. And employers who offer retiree benefits are moving to MA plans because insurance companies offer the employers great deals to do so.
In theory, you can change your coverage every year during open enrollment. However, for many people, this may not be a real choice.
The “disadvantage” of Original Medicare is that, unlike MA plans, there is no limit on out-of-pocket costs, so buying a Medigap plan is really essential. Original Medicare with a Medigap nearly eliminates out-of-pocket costs and provides an unlimited choice of doctors and hospitals with few barriers to care. As you get older and probably sicker, this unfettered access to health care is definitely worth the money!
However, for a new retiree, the monthly cost of a Medigap premium is not very attractive. For example, I pay a little over $200 a month for a plan with only $20 doctor co-pays and the standard $226 Part B deductible. This is a real bargain in the healthcare market, but it may seem high in the face of the relentless marketing of MA plans that offer $0 premium and extra benefits. The limited networks and other restrictions are never mentioned.
When people first enroll in Medicare, they are relatively young and healthy (relatively being the key word here). Medicare Advantage is simple — one plan including drug coverage and sometimes other benefits — while Original Medicare requires separate enrollments into a drug plan and a supplement.
But if the point is to offer consumer choice, then why are consumers prevented in most states from switching to Original Medicare with a Medigap later in their retirement? The Federal government guarantees your right to enroll in any Medigap plan for the first 6 months after you enroll in Part B, but after that insurance companies can deny you coverage based on pre-existing conditions, essentially making that initial choice a lifetime one for many people.
Getting rid of Medicare Advantage is not possible — and not even a good idea. There are MA plans that work well and for many people there are advantages to having the benefits integrated in one plan. But why not make it a true choice?
The simplest way to do this would be to expand Federal protections for purchase of Medigap policies. If Congress can’t do that, then more states could follow the model of states like New York and expand their own protections.
Another way to even the playing field would be to add dental and vision benefits to Original Medicare. These extra MA benefits — which often prove to be not as advertised — are a significant lure for retirees when they first enroll in Medicare.
The Federal government could limit advertising for MA plans — and at least ensure that the advertising is accurate.
And here’s a really easy one — what if the Federal government decided to market Original Medicare? Do a branding campaign around choice and access? Give Medicare a sexy name?
Some of these changes (dental benefits, for example) would be an incredible improvement but cost a lot of extra taxpayer money. Insurance protections and marketing would not cost the government much. But these proposals all have one thing in common — they are opposed by the insurance companies that are profiting massively from the MA program. The advantage for them is clear.
The advantage for seniors is not so clear. The best thing you can do for yourself is to consider whether you should enroll in Original Medicare with a Medigap while you are relatively healthy or lucky enough to live in a state with consumer protections.
