Commentary

What to do about the problem that is Medicare Advantage? | Ray E. Landis

Medicare Advantage plans are offerings by private insurers which replace standard Medicare coverage

March 23, 2023 6:30 am
U.S. President Joe Biden and U.S. Vice President Kamala Harris arrive to a meeting with governors visiting from states around the country in the East Room of the White House on February 10, 2023 in Washington, DC. This weekend President Biden is hosting governors that are attending the annual National Governors Association Winter Meeting. (Photo by Anna Moneymaker/Getty Images)

U.S. President Joe Biden and U.S. Vice President Kamala Harris arrive to a meeting with governors visiting from states around the country in the East Room of the White House on February 10, 2023 in Washington, DC. This weekend President Biden is hosting governors that are attending the annual National Governors Association Winter Meeting. (Photo by Anna Moneymaker/Getty Images)

President Joe Biden penned an op-ed in the New York Times earlier this month promising to strengthen Medicare 

The focus was on extending Medicare’s ability to negotiate prescription drug prices and requiring those with incomes above $400,000 to pay more in contributions to the program. 

These are worthy initiatives. But left out of the president’s blueprint were any strategies to deal with a situation undermining the stability of Medicare – the continuing growth of Medicare Advantage, or more accurately, Medicare Part C, insurance plans.

Physicians and other health care providers, meanwhile, contend the Biden administration’s proposed update to Medicare Advantage payment policies could wind up hurting their practices and patients, according to Axios.

The Capital-Star recently published a commentary piece published by a sibling site, Colorado Newsline,  praising Medicare Advantage from a beneficiary’s perspective  Author Dorothy McClure’s viewpoint unfortunately leaves out many of the details of how Medicare Advantage really works and why the continued growth of privatized Medicare threatens the future of healthcare for older Americans. 

Medicare Advantage plans are offerings by private insurers which replace standard Medicare coverage. Private insurers receive a fee from Medicare for each enrollee and may offer benefits above those offered by standard Medicare such as vision and dental care or hearing aids.

It is no wonder that many of those eligible for Medicare are gravitating toward Medicare Advantage plans. Standard Medicare has limitations. It only pays 80% of health care costs and lacks some of the important benefits critical to many older Americans. Most Medicare beneficiaries with a standard Medicare plan purchase supplemental insurance to fill the 20% cost gap.

So what is the problem with Medicare Advantage?

First, a brief history lesson is in order. When Medicare was established in 1965 it was fought tooth and nail by insurance companies (and many others, including the American Medical Association and future President Ronald Reagan).

The overwhelming Democratic majority in Congress was able to overcome this opposition, due to the landslide election results of 1964, but only through weakening the initial proposal.

Medicare was established with a requirement that beneficiaries pay 20% of their health care costs out-of-pocket and with other limitations, such as no coverage for prescription drugs, dental care, etc. Insurance companies quickly began selling Medicare Supplemental policies, and by the 1980s the federal government had to step in to provide oversight of these policies, which in many cases took advantage of beneficiaries through high deductibles and co-pays.

As health care costs rose, Medicare’s funding mechanism struggled. Elected officials, reluctant to raise payroll taxes or premiums to cover the costs, succumbed to the claims of insurance companies that they could cut costs and established Medicare Part C, initially known as Medicare Choice, but now marketed as Medicare Advantage.

Enrollment in Medicare Advantage programs was less than 10% of all Medicare beneficiaries in 2010, but is now approaching 30%.

Why?

Insurance companies have hit upon a winning formula to entice beneficiaries to enroll by offering extras, including such things as gym memberships in addition to non-Medicare-covered services. In addition, companies have vastly increased the marketing of Medicare Advantage plans – just watch the commercials during an episode of Jeopardy! or your local news.

Why are insurance companies so gung-ho on attracting Medicare beneficiaries to their Advantage plans? 

It’s simply Capitalism 101 – the companies are getting rich by selling these policies. And the way they are getting rich is by charging the federal government more to administer the health care of Medicare Advantage beneficiaries than it actually costs the insurance company.

You might shrug your shoulders and say that is how business works. But here are some of the problems with that approach. First, the average Medicare Advantage beneficiary costs Medicare 4% more than a standard Medicare beneficiary. Second, insurers continue to manipulate Medicare’s rules to get higher payments per beneficiary than is justified by their health condition. Finally, Medicare’s finances are shaky enough without the federal government enriching insurance companies.

But what about McClure’s contention that Medicare Advantage saved her life and saved her $900,000? Standard Medicare would have paid many of these costs, of course. But some of her post-operative services may not have been covered. 

These costs should be covered. But insurers and their allies in Congress now fight tooth and nail to prevent standard Medicare from expanding its coverage. And, as evidenced by Ms. McClure’s story, they are not above exploiting an enrollee’s health situation to attempt to prevent proper oversight of the Medicare Advantage program.

The most ironic thing about Ms. McClure’s essay? She is a native of New Zealand, a country which has universal health care coverage for all its citizens, not just those over the age of 65, and spends less than half the amount on health care costs per person than the United States. One thing New Zealand doesn’t have – a lot of for-profit health insurance companies.

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Ray Landis
Ray Landis

A former spokesman for the Pennsylvania AARP, Ray E. Landis writes about the issues that matter to older Pennsylvanians. His work appears biweekly on the Capital-Star's Commentary Page. Readers may follow him on Twitter @RELandis.

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