“If you’re signing up for Medicare benefits this open enrollment, odds are you aren’t actually enrolling in the traditional government program that people may envision. More than half of Medicare beneficiaries are now choosing an alternative version of the program administered by private companies.
Medicare, the paragon of America’s welfare state, is undergoing a subtle but fundamental transformation from government program to public benefit provided by private companies, a shift with major implications for both patients and taxpayers. This alternative version of Medicare, known as Medicare Advantage, now covers more than half of the program’s 60 million enrollees, or about 31 million Americans — nearly double its share 10 years ago.”
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“Medicare Advantage allows private insurers to offer their own plans that provide Medicare benefits, as well as some additional perks not available in the original program. The secret to the program’s success is simplicity. Traditional Medicare is a fragmented program: Part A covers hospital care, and Part B covers outpatient services. Patients must enroll in a separate Part D plan for prescription drug coverage that is administered by private insurers. Most people also purchase supplemental coverage, extra insurance that helps reduce their out-of-pocket costs.
Medicare Advantage, also known as Part C, combines those benefits into one insurance plan that also includes an annual limit on out-of-pocket costs, something that does not technically exist in regular Medicare.
But the benefits to patients seem to come at a cost to taxpayers. Though the health insurance industry disputes these findings, MedPAC, the independent committee tasked with overseeing Medicare on Congress’s behalf, found Medicare Advantage plans cost the federal government more money per patient than the original program would have if those same people had stuck with the traditional benefits.
Private companies are also making healthy margins on their Medicare business.”
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“Patients have clearly found something to like in what Medicare Advantage offers. The program was established in 1997 to give people a streamlined alternative, a private option less overt than more recent GOP voucher proposals.
But scholarly research and media investigations have revealed notable downsides in turning over a program that covers America’s seniors, the people who need and use the most health care, to private companies. Medicare Advantage enrollees are more likely to report trouble affording health care than people on traditional Medicare. Some of the behavior by Medicare Advantage plans, such as using AI to decide when to stop covering services for their enrollees, may be becoming more common in the private sector but is still unheard of for public programs.
The trade-off the United States seems to be making is accepting more administrative bloat and more stringent provision of benefits in exchange for a more navigable Medicare plan. The trade-off is one other countries have made as they designed universal health care programs. (A similar trend is underway in Medicaid.)
But as concern grows about Medicare facing a potential financial cliff, and evidence mounts about the costs of Medicare Advantage, the risks of the trade-off are becoming clearer. Medicare is no longer what it used to be: Once the epitome of government-run health insurance, its benefits are on the verge of being primarily funneled through private companies. Any attempts to change the program will have to wrestle with that reality.”
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“Why the movement? In a 2021 analysis published in Health Affairs, Ken Terry and David Muhlestein observed that “we’re witnessing the rapid privatization of Medicare” and offered an explanation: Medicare Advantage plans “offer beneficiaries a better deal than traditional Medicare.”
The premiums people pay for a Medicare Advantage plan can be significantly lower than the combined cost of supplemental coverage and a Part D plan — less than $50 compared to more than $200 on average, per Terry and Muhlestein — with the added benefit of having only a single insurance card. According to a 2022 Commonwealth Fund survey, the additional benefits offered by Medicare Advantage plans (such as dental or vision) and the limits on out-of-pocket costs were the most common reasons seniors gave for choosing the alternative over the original program.
In general, patients with traditional Medicare and people with Medicare Advantage say they have similar satisfaction with their benefits. On some metrics, the latter group excels; people with a Medicare Advantage plan are more likely to have a regular doctor and to say they have received preventive health care services. With a few exceptions for particular medicines, Medicare Advantage customers report fewer problems accessing their prescription drugs, too.
But people enrolled in Medicare Advantage also experience a unique set of problems compared to people who choose the original program.”
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“A higher percentage of Medicare Advantage enrollees report having problems affording care (about 19 percent, per a 2021 KFF analysis) than those on traditional Medicare (15 percent), though people on the original program without supplemental coverage had the most problems with affordability (30 percent). (Most people on Medicare do purchase this coverage.) Black Americans and people with lower incomes were more likely to report having trouble paying for health care while enrolled in Medicare Advantage.
Other findings appear worrisome, too. Medicare Advantage patients are less likely to receive medical care at the highest-rated facilities for their particular needs, compared to people with traditional Medicare, a reflection of more restrictive provider networks. Families also reported more satisfaction with end-of-life care when using traditional Medicare.
Specific business practices by Medicare Advantage plans, and their consequences for patients, have also been called into question by investigative reporting and government inquiries over the past few years, practices that seem to run counter to Medicare’s function as an entitlement program for Americans over 65 and those with long-term disabilities.
Earlier this year, STAT reported on the increasing use of AI algorithms by these plans to determine when to cut off benefits for a customer. The lead example of their reporting was an 85-year-old woman with a broken left shoulder, whose insurer followed an algorithm that said she should be ready to leave a nursing facility and return home within 17 days.
On the 17th day of her stay, the insurer said it would no longer cover the bills for her stay, even though her doctors and nurses observed that the woman was still in extreme pain and incapable of doing basic activities, such as dressing herself or going to the bathroom. It took more than a year, and a federal judge’s order, for the patient to receive payments for the three additional weeks she needed to stay in the nursing facility. Doctors shared other stories of patients who saw benefits withdrawn at the end of their life, leaving their families to fight over the leftover bills for years after their loved one had died.
A report from federal investigators published in April 2022 found that tens of thousands of Medicare Advantage customers were denied coverage for services they should have been entitled to. A significant number of prior authorization denials (13 percent) and payment denials (19 percent) reviewed by the investigators were for services that should have been covered by the program but were not.
“Denied requests that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care and can burden providers,” they wrote. “Even when denials are reversed, avoidable delays and extra steps create friction in the program.”
In addition, as the New York Times reported last October, most of the largest Medicare Advantage insurers have been the subject of federal audits that found they improperly billed the program and of litigation that accused them of fraud. Taken together, the plans overbilled Medicare by between $12 billion and $25 billion in 2020, depending on the estimate.
Though Medicare Advantage was first established as a tool for reining in spending, these private plans instead seem to be perpetuating the program’s solvency crisis.
According to MedPac, since 2004, Medicare has always paid more to Medicare Advantage insurers for the cost of covering their customers than the program would have spent if the same beneficiaries had instead been enrolled in traditional Medicare. Some years, the private plans were receiving a nearly 20 percent markup compared to the original benefit structure.”
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“The growth of Medicare Advantage is contributing to the financial crunch. Those plans receive funding based on the type of service provided to their customer, which means money for hospital care comes from Part A. Annual Part A payments to Medicare Advantage plans are expected to increase from about $176 billion in 2022 to $336 billion by 2030.
With revived concerns over Medicare’s solvency and evidence of excess spending in Medicare Advantage, policymakers are starting to look at making changes to the program. But that won’t be easy.”
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“Health insurers are going to fiercely defend their Medicare Advantage business against any proposed cuts”
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“It is difficult, at this point, to imagine the Medicare program without Medicare Advantage. The question is whether policymakers can make it more cost-effective and crack down on insurer behavior that runs counter to the program’s objectives. Recent events suggest that if they try, they will have a fight on their hands.”