Lessons of Medicare dis-Advantage

Published by clickbroker.blogspot.com.

The Washington Post’s “Hidden Costs of Medicare Advantage” reports seniors should beware; Medicare Advantage not only costs the government more but might cost seniors more too. The challenge to healthcare reformers is whether to consider Medicare Advantage an entitlement or an extra cost option for seniors. The opponents of reform are curiously framing Medicare Advantage as an entitlement, while professing opposition to the expansion of entitlement spending.

Let’s examine the pragmatist opponents of reform arguments: 1. Medicare Advantage provides choice, 2. Medicare Advantage improves the quality of care, 3. Medicare Advantage lowers costs for low-income seniors, and 4. raising Medicare Advantage premiums through lower subsidies effectively removes an existing benefit. The opponents don’t discuss the danger seniors face in restrictive provider networks.

Medicare Advantage limits choice of doctors, hospitals and covered procedures. If virtually all doctors and hospitals accept basic Medicare, by definition each network can only be a subset. Whether the advice provided by primary care doctors in Medicare Advantage HMOs improves the quality of care is questionable. But the requirement for a separate referral for every single specialist, test and procedure is enough to weed out the more frail seniors from Medicare Advantage. How easy is it to get a referral if you can’t drive?

During younger seniors’ healthy periods, Medicare Advantage might substantially lower seniors’ medical expenditures. Providing the plans have no additional premiums and minimum “out of pocket” deductibles and co-pays, poorer seniors benefit. But like all private insurance, there of traps everywhere. There could be many situations when a senior actually pays more for the same test or procedure under Medicare Advantage than basic Medicare.

Seniors were never entitled to Medicare Advantage which costs the government an average of $850 per month, 14% more than traditional Medicare. With 25% of seniors on Medicare Advantage, it’s become too politically difficult to take it away. Once a senior starts having a serious or chronic medical problem, the government actually raises its payments to the private insurers. The risk exposure for private insurers is minimized; all upside with little downside.

The only protection seniors are provided is that they cannot be turned away during annual open enrollment periods. But at the same time they cannot change plans if they get sick and are not satisfied with the providers’ networks during the contract year.

The New York Times’ “Choosing a Policy to Cover What Medicare Doesn’t” reports on how expensive and complex the process of acquiring Medigap coverage is. After a 6 month open enrollment period, state insurance laws control whether policies are medically underwritten and other consumer protections. With a few exceptions open enrollment starts with Medicare eligibility and is never repeated. This leaves the Medigap route even more difficult to navigate than Medicare Advantage.

Medicare controls the minimum benefits for 12 model Medigap plans (A-L), but not the cost of premiums. Medigap “Select” plans restrict benefits to the insurers’ networks. Outside of networks, Medicare co-pays are not covered. But even with Select seniors are protected from the price gouging that can occur outside the Medicare Advantage networks. Given that Medicare does not allow balance billing, Medigap coverage might not make any economic sense anyway.

Pete Peterson’s (Blackstone Group co-founder) Financial Times commentary “Questions America must ask on health costs” states that 30% of Medicare expenditures are for end of life care. Regardless of whether public opinion feels this is justified, the real issue for Medicare Advantage providers is have they been able to eliminate seniors from their memberships before the final year of life?

Since I am not a senior, I have not experienced either basic Medicare or Medicare Advantage. But if I could buy my way into to basic Medicare, I would gladly surrender my private insurance.

Allowing private insurers to engineer their networks and benefits to exclude the worst risk seniors while costing the government more is no benefit to either the seniors or the government. The only reason that Medicare Advantage has any popularity at all is that a constantly growing population predicates a constant flow of younger healthier seniors.

My conclusion is that seniors should stick with basic Medicare and not purchase Medigap. Save the Medigap premiums to pay for Medicare co-pays and deductibles. Seniors – stay with the ultimate choice – virtually every doctor and hospital in the country. And to the health reformers in Washington, I say open Medicare to all so every American has the ultimate choice!

It’s time to sell Humana (HUM), UnitedHealth (UNH) and WellPoint (WLP) before this Medicare Advantage and overpriced Medigap Ponzi scheme comes to an end.

No Disclosures.

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