Nearly a quarter century ago, then Speaker of the House Newt Gingrich said this about the original Medicare program: “We believe it’s going to wither on the vine because we think people are voluntarily going to leave it — voluntarily.”
Gingrich argued that original Medicare — based on a 1960s-style fee-for-service benefit package with a confusing set of deductibles, co-insurance, and copays — was stuck in the past. He saw a day when Medicare-contracted private health plans would prove so attractive that Medicare beneficiaries would have to choose them.
It’s taken a generation, but Gingrich is on the verge of being right about Medicare.
Medicare began experimenting with managed care as an alternative to the original program in the 1970s, and annually contracted health plans — called Medicare+Choice — were made a permanent part of the program in the 1990s. Because of funding reductions, it initially floundered.
That changed in 2003 with the passage of the Medicare Prescription Drug, Improvement, and Modernization Act, which renamed the program Medicare Advantage, raised payment rates, and added risk adjustment to the payment methodology. Leading managed care companies, such as UnitedHealth Group, Humana, Aetna, and Blue Cross Blue Shield companies, began marketing Medicare Advantage products every fall. So did dozens of smaller and health system-owned health plans. Enrollment in these plans has increased every year since then. Today, more than 22 million beneficiaries choose Medicare Advantage, about 35 percent of all people with Medicare, up from about 11 million people a decade ago. This has occurred despite a gradual phase down in funding put in place by the Affordable Care Act.
In 2019, Medicare Advantage plans stepped up their coverage to include the delivery of meals, rides to physician appointments and pharmacies, home safety improvements, and a host of other new benefits. As described in a new report on Medicare Advantage plans that one of us (M.A.) co-authored, 153 Medicare Advantage plans are now leveraging new Trump administration guidance and experimenting with 842 “flex benefits” this year. These benefits fall into two broad categories: reducing costs to encourage members to receive preventive care, such as free primary and podiatry care for people with diabetes; and non-medical benefits, such as home-delivered meals following a hospital discharge, home safety interventions, and non-skilled in-home caregiving.
Medicare beneficiaries select Medicare Advantage for a variety of reasons. These include catastrophic cost protection, care management programs, and a range of mainly health-related supplemental benefits such as dental checkups, eyeglasses, hearing aids, over-the-counter drugs, and gym memberships. The trade-off for these extras is limited choice of providers and managed care tools like prior authorization. These limitations put off some Medicare beneficiaries, but have not dampened the high overall satisfaction with Medicare Advantage or its continued growth.
Medicare Advantage’s competitive edge over original Medicare will take another step forward in 2020 when plans are expected to gain additional flexibilities in offering non-medical benefits for people with chronic diseases. The next wave of new benefits can include anything that the Centers for Medicare and Medicaid Services deems “has a reasonable expectation of improving or maintaining the health or overall function” of enrollees with chronic diseases. While CMS has not yet offered its final guidance, this will likely include meals, transportation, pest removal, and activities that combat social isolation and depression, which could include companionship services and pet therapy.
Some of the brightest minds in managed care are working to determine whether relatively inexpensive, newly permissible benefits like these will pay for themselves by reducing the number of expensive medical procedures. Actuaries at Wakely Consulting, for example, have modeled the value of a falls reduction benefit. Using Medicare claims data, they determined that injury-causing falls are associated with spikes in medical costs that average about $10,000 compared to pre-fall costs. So an intervention that reduces falls by even 10 percent would likely pay for itself if it costs less than $1,000 per fall-prone member receiving the service. Hiring a handyman for a couple hundred dollars to install grip bars in a shower or modify cabinetry would be a bargain.
How does original Medicare stack up in comparison to Medicare Advantage? The Affordable Care Act and the Medicare Access and CHIP Reauthorization Act (MACRA) introduced value-based reimbursement reforms into original Medicare. These may make the program a more efficient payer, but they do not necessarily improve benefits for Medicare beneficiaries. Medicare Supplement Insurance (Medigap) continues to be purchased by roughly 13 million Medicare beneficiaries. It plugs gaps and simplifies original Medicare’s idiosyncratic coverage, but it is too expensive for lower-income beneficiaries. In addition, state and federal laws prevent Medigap from keeping up with Medicare Advantage.
A 2017 report by the National Association of Insurance Commissioners demonstrates that only a handful of states permit Medigap carriers to offer any “innovative” benefits. And the modest flexibilities permitted — such as eye exams — pale in comparison to the richness and diversity of Medicare Advantage benefits.
In subtle and unsubtle ways, the Trump administration has seeded the ground for massive gains in Medicare Advantage enrollment. These include loosened restrictions on marketing Medicare Advantage plans, new consumer tools that accentuate the advantages of these plans, greater use of telehealth than permitted in original Medicare, the elimination of “meaningful difference” tests that limit the number of Medicare Advantage plans in a given market, and extra time for plan sponsors to secure a provider network. Meanwhile, the administration has finalized a regulation that may substantially lessen the number of accountable care organizations participating in original Medicare — the original Medicare reform with the greatest potential to align providers in reimbursement systems outside of Medicare Advantage.
Congress has also quietly added tools to Medicare Advantage that aren’t available in original Medicare. A little-noticed MACRA provision will remove two of the most popular Medigap plans from the market in 2020, further weakening its value proposition versus Medicare Advantage. This is not an accident: Many conservatives have long disliked original Medicare’s centralized pay schedules and the perverse incentives of fee-for-service medical care. And many liberals are willing to strengthen Medicare Advantage if that’s the only way to offer more generous health care coverage to seniors.
Intentionally or not, Congress and various administrations have created two Medicare programs: the original fee-for-service program with rules and coverage that the private market largely abandoned decades ago, and a managed care program that has just benefited from another set of favorable legislative and regulatory tweaks. Maybe it is unfair that policy makers are favoring Medicare Advantage. But if this is the only way to deliver modern and more generous health benefits to Medicare beneficiaries, then a thumb on the scale is better than denying beneficiaries access to 21st-century benefits.
It’s no wonder that Medicare beneficiaries are voluntarily leaving original Medicare — voluntarily.
Michael Adelberg is a principal at Faegre Baker Daniels Consulting. Kristin Rodriguez is the chief knowledge officer for the Health Plan Alliance.
A number of people have commented on their preference for Traditional Medicare & a Medigap (supplemental) plan but have not mentioned if they are also purchasing a private, federally subsidized Part D drug plan. If you don’t have a Part D plan and don’t have approved coverage from a retiree plan or VA coverage, you are putting yourself at risk if, at some time in the future, you decide you need and want coverage. First, you will likely be subject to a penalty of 1% a month from the date of your initial eligibility and secondly, you generally will be restricted to the annual open enrollment period (currently 10/15 to 12/7) when you can enroll late with an effective date of January of the next year. If you want to protect yourself against these potential problems, many people choose the lowest cost (ie.under $20/mo.) plan from a reputable company.
OK so after my wife and I paid for Obamacare this year with the cheapest plan that cost us $472 a month while taxpayers paid $1600 for our plan(ever hear of a $1050 healthcare plan with a $10,000 deductible per person?), Medicare might be a beautiful thing at $400 apiece counting everything.
I am a physician that takes care of medicare patients. My medicare advantage patients are paying a lot more out of pocket because a lot health care providers rehab units and physical therapy are not signed up with these plans. I have had patients being denied rehab services after a stroke. These plans are horrible for smaller communities. Physicians are paid to not see patients. This is government controlled medicine and patients loose freedoms to see who and where they get their healthcare. These plans deny ct scans mri’s and care that your Doctor feels is needed for you. Big Business and Government decide your meds and your treatment plan and not your Doctor. The Ultimate bait and switch
I have done major research on Medicare options now that I am 64 and you are right Rick D. Medicare Advantage is not what it says. It’s not an advantage. They take the doctor right out of the equation. People suffer in so many ways. On the other hand, Medicare supplements are expensive and my wife and I will be paying over $650 a month for the N Plan(with Part B) and a Part D for meds. and the part D won’t even pay for a med she is taking and we have to pay for it all. And will not reach the deductible ever. It’s a total rip-off. Thinking about not even getting a plan D and paying the penalty down the road if we can actually use it. I’m really disappointed about what it costs after paying into this fund my whole life.
Dr. Schoeling, thanks for sharing your experiences that are very common. I have been certified Medicare counselor volunteering in a non-profit agency for the past 10 years and would like to clarify a few misconceptions. Medicare Advantage and Prescription Drugs Plans were passed into law by Congress in 2003. These plans were crafted and pushed by the insurance and pharma industry. These plans are only offered by private insurance companies that receive over $300 billion/yr. in federal subsidies. These plans have been a huge gift to them for the past 15 years. They have a monopoly that Congress approved and taxpayers fund year after year. By comparison, Traditional Medicare is not authorized by Congress to offer prescription drug coverage, to negotiate drug prices or add benefits that MA plans have, including a maximum out of pocket limit of $6,700/yr on medical expenses (excluding prescription drugs). The issues of limited access to health care facilities, tests, treatment and providers reflect the performance of the private insurance companies not Medicare. Insurers focus on marketing and sales especially to the healthiest seniors to maximize their subsidized profits and create financial penalties for sick people to afford the diagnostic tests, treatment and drugs needed to keep them alive.
I am not being pushed out of medicare original and medi gap as my main benefit from it is that l can go get health care anywhere anytime l want whether l have money to pay for it or not, it pays all co pays and deductibles and l am most concerned with that and being able to afford to seek medical help when ever l need it. Ambulance, ER or hospital stay if needed , l don’t worry about it and l will not lose my home from running up big bills which l saw happen to neighbors. It covers me by my paying monthly and it is budgeted and l love it that way. These 20 calls a day are driving me nuts. Whenever l am rushed into buying something like that l get suspicious. I did try SCAN once briefly and liked it for some things but not others and went back to original and have been satisfied. It works for me .
In response to Ross, Medigap plans only cover deductibles and co-insurance for services covered in original Medicare. As a result, Medigap plans do not cover any oral prescription drugs. There is no difference If you have a Medigap or a MA plan, you generally need to purchase a separate Part D drug plan from a private insurer which may not cover an expensive drug that you take and there is no out of pocket limit for drugs with either a Medigap or MA plan. It is a challenge for many people with acute & chronic illnesses to find a plan with coverage and access to services that they need and at a cost (under $2400/yr + drug costs) that they can afford.
Dear Michael and Kristin,
While your article lists the benefits of Medicare Advantage, it lacks the listing of the disadvantages. There are many.
First, you don’t mention the potential of as much as $6,700 of out of pocket medical expenses.
There is no mention that most plans require use of network providers.
Those who have dual residence may have difficulty using their plan.
If the plan offers Rx coverage, you must take that formulary which may not cover an expensive drug you take.
Finally, you mention that Medigap is too expensive for lower income beneficiaries. A 65 year old going on Medicare will usually pay less than $200 per month and have very little or no out of pocket medical expenses.
98% of my clients choose Original Medicare with a supplement when I ask them what they would like their plan to cover.
Sincerely,
Ross Schriftman, RHU, LUTCF, ACBC, MSAA
Horsham, PA
Prescisely! Thank you for explaining why l prefer original and a medi gap plan.
Ross, I’m not sure where you get the $200 a month number. Original Medicare Plan B will cost my wife $144 in March 2020 plus the $185 deductible per year with the cheapest supplement I have seen so far being $85. And then Medicare Part D, cheapest I found was $13.50 a month with a $435 deductible which she will never reach and a med that’s not covered that costs $158.50 a month. So she will probably just pay the penalty down the road when plan D actually pays for something. Your numbers are seriously exaggerated or just old. repectfully
My wife starts Medicare in March 2020. $144 for Part B, $85 for the cheapest Part N supplement found so far, not to mention the $185 copay for the year, $13.50 with $435 deductible for Part D with a med they won’t even cover that costs $158 a month. And all this after we paid into Medicare for over 30 years. Add that up genius. I bet you think Medicare for all is a good idea.
MA is fine until you develop a serious illness and need to go way out of state for a clinical trial, or need a new [expensive] drug just approved by the FDA.
And too bad for those who travel a lot or want to “snowbird” in a different state, MA keeps you tethered to your geographic area. Not worth it for me!
I just don’t see how this can work❗️
Interesting. I am an RN and always felt myself to be well informed. However on past year or so when talking with friends , I realize I am a tad confused 🤣 Howevef I am 86 and have been paying. A slot for my ‘gap’ insurance do wondering if I should reconsider.
You will regret switching at your age.
Patty, keep in mind there are multiple choices for Medicare Supplemental (Medigap) plans offered by private ins. companies. These plans are regulated by state insurance depts. that offer consumers comparative info on coverage and costs of various Medigap plans offered in your state. You may find there is a lower cost insurer for an identical Medigap (A, B, C etc) plan or you may find a plan that costs less that still provides you 100% coverage for inpatient (Part A) and outpatient (Part B) services. If you would like to talk to a free independent Medicare counselor in your area, contact the Medicare-funded SHIP organization 877-839-2675 or contact the non-profit Medicare Rights Center’s hotline 800-333-4114.
Best wishes.
Medicare Advantage sucks in many ways. I advise people to stick with regular Medicare and get a supplement. Until we see how all these added benefits work out, and how easy, or difficult it is for the insured to actually get them, I will stay away. There have been many reports of insurance companies exaggerating the severity of member’s health status to get higher reimbursements. If you have chronic illness you will pay higher co-pays to see specialists – nearly twice as much as the 20% you’d owe with regular Medicare. If your health situation is complex you may see several regularly. Co pays for out patient surgery and imaging may also be higher – if you have a supplement you would pay a higher monthly premium but there are no co pays. Many people don’t know that if you sign up for Medicare Advantage when you first become eligible, you have a fairly short window to change to a supplement without having to undergo underwriting which may make it much more expensive of keep you from getting it at all. We must keep Medicare Advantage from taking over.
Thanks? Rebecca , this is what a friend of mine thought and he went back to original Medicare.
Unless you have a Medi-Gap plan with community pricing, your premiums go up as you age. Medicare Advantage plans all have community pricing. My mother switched to a Medicare Advantage plan when she was in her mid seventies. She put the differences in premiums (several hundred per month) in a special saving account for health care expenses. When she died in her late eighties there was still money in that account even though her last year included several hospital stays, many medical procedures and a brief stay in a nursing home. Medicare Advantage was a cost effective choice for her. She routinelysaw a PC doctor, a cardiologist, and a kidney specialist. Since she had a Medicare Advantage that was a PPO, she did not need a referral to see a specialist. There were many in-net specialists including the doctors she had already established a relationship with. The HMO Medicare Advantage Plans have more restrictions. We, too, are comfortable choosing a Medicare Advantage Plan. Since there is a stop loss limit, we know the most we will have to spend in any one year. (Unfortunately, drug plans in MA and the original stand alone Part D do not have stop loss limits.)