Medicare Advantage plan networks will be affected by payment cuts to Medicare Advantage plans. Smaller provider networks could be the future for Medicare Advantage.
I was at a meeting yesterday with a rep from a Medicare Advantage plan that is new to the Tucson market. This Medicare Advantage company is building its Tucson network of doctors and hospitals while trying to entice seniors to enroll in its plans. The rep was saying that the University of Arizona Medical Center asks for higher payments than other hospitals in town, so his Advantage plan will not be contracting with them.
The rep also said some large doctor groups demand payments that are higher than Medicare “fees for service”. The Advantage plan must decide if that group of doctors is critical to having a strong network in Tucson and if they should agree to pay higher fees. If the group is big enough, they can command higher payments – or they can be left out of the network.
Learning about how Medicare Advantage plans build their provider networks was very interesting and very timely as network reductions have been in the national news lately. UnitedHealthcare (UHC) announced major cuts to its Medicare Advantage provider network in Connecticut. UHC also made the news in Florida when it had hospital contracting issues there. This is all about what the hospitals want to get paid and what the insurance companies say they cannot pay.
When it comes to Medicare Advantage (MA), insurance companies are in a bind because they get almost all of their money from Medicare. Medicare pays MA plans a certain amount of money per person enrolled in their plan. That payment is based on what Medicare pays to hospitals and doctors “on average” for each Medicare beneficiary in each county or region of the country. Go to kff.org to see details of MA payments around the country.
Most Medicare Advantage plans in Arizona and Florida have no premium for the senior who enrolls. These $0 premium plans mean that all of the funding comes directly from Medicare. If providers demand more money, the MA plan has two choices: 1) Drop the hospital or doctor group from the network; 2) Charge a premium to make up the difference between what the plan gets from Medicare and what its costs are (including its 4-5% profit margin).
In negotiating with hospitals and doctors, Medicare has the upper hand because Medicare gets to set the “fee for service”. Hospitals and most doctors cannot afford to tell Medicare to take a hike. Check out kff.org again to see information on Medicare providers. But insurance companies do not have the same leverage as Medicare because hospitals and doctors can refuse to contract with them if they don’t get the price they want.
Medicare Advantage is very popular in Arizona (and Florida) with close to 50% of Medicare beneficiaries in Pima, Maricopa, and Pinal counties enrolled in MA plans. Medicare Advantage enrollment in big cities in Florida is also around 50%. Cuts to Medicare Advantage (MA) that result in reductions in MA plan networks will be felt by seniors – and senior will be mad.
When would seniors find out about changes to their Medicare Advantage plan? That would be around October 1st, just before the November elections. Each person enrolled in a Medicare Advantage plan receives their Annual Notice of Change (ANOC) at the end of September. If there are big changes, like no more $0 premium plans, or big hikes to co-pays (which are already fairly high in my opinion), seniors will be really angry just in time for the mid-term elections. This would be very good for Republican candidates who would say this is one more bad outcome from Obamacare.
For a short video explanation of how Medicare works and choices for Medicare coverage, go to INTRODUCTION TO YOUR MEDICARE CHOICES.