The End of Medicare Advantage?

Many people (myself included) have predicted the demise of Medicare Advantage.  The Health Care Reform law created a number of new rules for insurance companies that run these plans and profit from the billions of dollars they receive from the Medicare Trust Fund.

Starting in 2011, every Medicare Advantage plan must cap enrollees’ out-of-pocket expenses. This means a person treated for cancer won’t run up bills that can total $10,000 or more.

Beginning in 2014, profit margins for Medicare Advantage plans will be capped as they will be required to spend 85% of their revenue on their enrollees.  Most Advantage plans already meet this requirement, but some plans have spent as little as 70% of revenue on their enrollees.

If you think these tough rules (and increased oversight) signal the end of Medicare Advantage, you would be wrong.  In both Tucson and Phoenix new Medicare Advantage plans are coming to these markets.

SCAN (Senior Care Action Network) has nearly 8,000 enrollees in Maricopa county after just two years there.  SCAN will begin marketing its plan in Tucson later this year.

Caremore was new to the Tucson market in 2010 and will be expanding to Phoenix for 2011. Both SCAN and Caremore are $0 premium Medicare Advantage plans which include Part D.

With millions of baby boomers turning 65 each year, insurance companies have determined that the growing Medicare market is good for their bottom line.

The Associated Press, reporting on Humana’s strong business performance in 2010, said “its lucrative Medicare Advantage business posted double-digit enrollment growth”.

Reuters reported that UnitedHealth Group posted a higher-than-expected second-quarter profit, “helped by growth in its Medicare Advantage plans for elderly and low-income Americans”.

Reuters reported that WellPoint (which owns many Blue Cross Blue Shield companies across the country) “wants to expand its Medicare business to take advantage of the post-war baby boom generation”.

Humana’s CEO recently told industry analysts that Medicare Advantage remains a “tremendous opportunity” and acknowledged that he’s been surprised that more competitors haven’t ventured into the market.

It looks like there will be more competitors getting into the Medicare Advantage market and that means more options for seniors in Tucson and Phoenix.

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6 Responses to "The End of Medicare Advantage?"

  1. tiponeill says:

    I have to decide next month, and I hate paperwork – there are far too many “choices” and I can’t deal with it.
    So my plan – just as it was with the IRS – is to take the “standard deduction”.
    Just plain Medicare, thanks.
    Any serious problems with that plan ?

  2. medicareblogger says:

    Having only Medicare is your choice to make, but I don’t think it’s a good choice.  Because you pay 20% of all doctor bills, lab tests, physical therapy, chemo and radiation therapy, you are leaving yourself at great risk for major medical bills.
     
    A few months ago one of my clients referred a new client to me.  This very healthy 65 year old man had only Medicare coverage.  He then had a bike accident and ended up in the hospital with severe injuries.  He was going to have to pay 20% of all his doctor bills – as well as 20% for all the therapy he was going to need when he got out of the hospital.  He was at UMC and his wife said the doctors were great there – but she couldn’t keep track of how many doctors had worked on him.  There were his surgeons, the anesthesiologist, all the docs who had checked in on him after his surgery……..I think you get the picture.  He might end up having a total bill for doctors of $200,000.  His 20% could be $40,000!
     
    Because this man was only two months beyond his 65th birthday, he was in his “guaranteed issue” period for a Medicare Supplement.  He filled out the application and got covered without having to answer any medical questions.  The Medicare Supplement company could not refuse him no matter what his health status.
     
    If you don’t think you don’t want a Medicare Supplement, Medicare Advantage is the next best coverage.  Though people with lots of health issues soon find that their co-pays can add up quickly if they see several doctors each month.  In this case a Medicare Supplement is a better choice because you can get a plan F (think “full coverage”) for $98 per month and have no co-pays when you get any Medicare-covered medical services.
    If you want an overview of your choices, take a look at a video I prepared: Intro to Your Medicare Choices.

  3. tiponeill says:

    Thanks – I was planning on the Medicare Supplement, thinking of it as a “standard option”, as opposed to having to chose between dozens of Medicare Advantage companies.
    Medicare Suppliment only comes in one flavor, I hope ?

  4. In your response to tiponeill above, your reply makes it sound like the Medicare supplement that your client took out AFTER his bicycle accident will pay for the possible $40,000 that he was previously on the hook for. That is not the case. His new Medicare supplement provider will only pay for his medical bills incurred AFTER his policy’s effective date. Any medical bills the bike rider incurred before his policy went into effect are still his personal responsibility. I’m sure you know that, medicareblogger, but I don’t know if tiponeill would realize that.

  5. medicareblogger says:

    Thanks for clarifying the Medicare Supplement coverage.   This man was in the hospital for two weeks while he only had Medicare.  He was still in the hospital when his Medicare Supplement policy went into effect – so he would be fully covered with his Plan F for the rest of his medical bills as well as all the medical attention he was going to need after he got out of the hospital.  I was figuring the potential $200,000 in medical bills as his total bill.  But you are right to point out that he will have big bills for the two weeks when he only had Medicare and he owed the 20% Part B co-insurance (as well as his $1100 Part A deductible).

  6. Tom Hinson says:

    Also, the medicare supplement coverage may not cover an pre existing condition treated prior to beginning coverage of a new supplement policy.  Many  insurance carriers have exclusions for six months for pre-existing treatments or conditions.

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