MEDICARE ADVANTAGE UNDER ATTACK
When asked how Medicare can cut costs, President Obama has a standard response, and he uses it every time the question is asked. He says overpayments to Medicare Advantage plans, or “subsidies to private insurance companies”, will be cut. These cuts will save billions of Medicare dollars over five years.
Cuts in payments to the private insurance companies running Medicare Advantage plans will start in 2010. The companies got the bad news back in March and had to determine how they would change their plans’ benefits for 2010. Enrollees in these plans won’t learn of any changes until October when they get a packet of information from their plan sponsor. Only then will we know how the private insurance companies have reacted to 2010 payment cuts. And only then will the 23 percent of Medicare beneficiaries who are enrolled in Medicare Advantage plans know how it all affects them.
Some History
People on Medicare have the option of enrolling in privately-run health insurance plans, known as Medicare Advantage plans. In 2009, the government will pay these private plans an average of 14 percent more than it would pay for people in “Original Medicare”. “This added cost contributes to the worsening long-range financial stability of the Medicare program,” according to the Medicare Payment Advisory Commission (MedPAC), a nonpartisan group that monitors Medicare.
In 2009, 23 percent of all Medicare beneficiaries (about 10.4 million out of the 45 million people in Medicare) are enrolled in Medicare Advantage plans. In some states, like California, Arizona, Pennsylvania, and Oregon, over 30 percent of Medicare beneficiaries have enrolled in these private plans.
Enrollment in Medicare Advantage more than doubled after the introduction of the Part D prescription drug plan in 2006. That year, all seniors were encouraged to sign up for the drug plan or face a penalty for delayed enrollment. Part D drug plans were offered by the same companies offering Medicare Advantage plans, most of which included the prescription drug plan for no cost. With Part D stand-alone plans costing between $10 and $50 per month, many seniors were attracted to zero premium Medicare Advantage plans that included Part D.
Most Medicare Advantage enrollees are in health maintenance organizations (HMOs) in which members are limited to a network of health care providers in certain areas. Since 2006, the fastest-growing Medicare Advantage option has been private-fee-for-service (PFFS) plans, which allow members to go to any provider who is willing to bill the insurance company without having a contract with that company. These plans were designed to operate much like Medicare, which is a “fee-for-service” plan. Private fee-for-service plans are not required to have a network of providers, although this will change in 2011.
All Medicare Advantage plans are required to offer at least the same benefits that traditional Medicare offers. But they have become increasingly popular because they frequently offer benefits not covered by traditional Medicare, such as vision, hearing, and dental care; health club memberships; preventive and wellness care.
Below are some examples of Medicare Advantage enrollment by state. The numbers are the percentage of Medicare beneficiaries enrolled in Medicare Advantage.
| Oregon 41% | Pennsylvania 36% | California 34% | Rhode Island 34% |
| Arizona 32% | New York 28% | Florida 28% | Texas 17% |
| Georgia 13% | Kansas 9% | New Hampshire 6% | Vermont 3% |
More information can be found on the Kaiser Family Foundation web site (kff.org) on the Medicare Advantage Tracker page. Data is provided on the number of Medicare beneficiaries as well as the average amount private insurance companies are paid per month per enrollee in each state. Monthly payments per enrollee range from $1,013 in Florida to $726 in Vermont.
While the various health insurance reform bills in Congress are being loudly debated, it appears the changes that are coming soon to Medicare Advantage plans are flying under the radar. Some companies will pull out of the Medicare Advantage market, requiring seniors to find a new plan. Other companies will increase co-payments and perhaps raise premiums. Many plans now have no premium, which has been a major selling point for frugal seniors and cash-strapped Medicare beneficiaries on Social Security Disability. October should be interesting when the details of 2010 Medicare Advantage plans are released.
