Medicare Advantage’s Many Advantages
Private health insurance for seniors expanding rapidly
By Marty Bell
Sometimes controversy can boost sales. A controversy that shows up repeatedly on your television and in your emails almost daily may irk you, but at the same time it pushes the issue front and center in all of our very crowded minds.
Though there may be differing opinions on the effectiveness of the now nine-year old Affordable Care Act, there is not a lot of complaining coming from the health insurance companies that offer Medicare Advantage plans. For 2019, there are 3,700 plans on the market, a growth of 600, or 16 percent, in the past year alone. The larger providers—United Healthcare, Aetna, Anthem and Humana, who together claim over 50 percent of the market—are all vastly expanding the areas they serve. And competitors, large and small, are racing to get into (or back into) the space. Mutual of Omaha, for instance (which last year entered the reverse mortgage space via its purchase of Synergy One), is also now re-entering the Medicare Advantage space after a two-decade absence. Little known local companies are popping up in markets, urban and rural, throughout the country.
The attraction? This is a market that grows by 10,000 new Medicare qualifiers per day. There are now 22 million adults over 65 who have Medicare Advantage plans, that is 33 percent of the Medicare market – and up from 25 percent in 2010, when the ACA was implemented. Historically, African Americans and Hispanic Americans have not utilized this program, but that is changing significantly. Like your utility and television cable or streaming providers, these health insurance providers maintain a steady and steadily growing stream of monthly revenue. It sure seems appealing to sell a product that you sell once and that then collects a premium month after month for years. Since evidence proves Americans are either creatures of habit or unusually loyal (or both), once they climb in bed with and cozy up to your product, they tend to remain there.
Why Medicare Advantage?
The Affordable Care Act aimed to refocus healthcare away from overhead-heavy large health facilities, like hospitals with necessary up-to-the-minute equipment and large around the clock staffs, to on-site, in-home care. It also advocated an approach called “patient-centered care,” in which each individual’s situation and the response is treated as something unique as opposed to just another case on the health assembly line addressed with standard and too often unnecessary procedures.
Medicare Advantage was created as a demonstration program in the Balanced Budget Act of 1997. Medicare Advantage, or Part C, is provided by private insurance companies and in addition to including Part A (hospitalization) and Part B (physician and surgical services), it provides additional benefits from a menu that has expanded recently and become more flexible. Each plan makes its own rules and chooses the benefits it offers, but most plans include dental and some vision services and now many also include reimbursement for adult day care services, meal delivery, transportation to doctors and home modifications, such as bathroom grab bars and ramps. There is also a recent emphasis on reimbursement for telehealth—doctor’s appointments via technology—which is currently all the rage and particularly helps to fill the care-gap in rural areas. Perhaps, most significantly, many Medicare Advantage plans can now, when the provider chooses to offer it, cover the expenses of health-related in-home care or caregiving by non-medical professionals. Assistance with what are referred to as Activities of Daily Living (ADLs)—dressing, bathing, cooking, shopping, etc.—has become increasingly necessary as the mounting wave of longevity continues to extend more lives and paying for it is a burden that has triggered widespread discussion among aging services professionals. Long-term care insurance is one available solution, but its costs and limitations have made it a difficult sell and the response has been scarce. The CLASS Act was a proposed innovation by the Obama Administration early in its term, a national opt-out insurance program that would have been paid for with additions to Social Security and Medicare payments, but was quickly pulled from the contentious debate surrounding the Affordable Care Act. Eight-hour a day, weekday-only caregiving will cost about $3,200 per month and 24-hours a day, seven days a week caregiving will cost over $150,000 per year, so any relief from this is welcome.
Is Medicare Advantage right for you?
Because Medicare Advantage plans vary in benefits and costs, they require taking the time to study them individually. There are an average of ten plans available to residents in each area of the country.
Your assessment needs to include the cost of monthly premiums, co-pay requirements and deductibles measured against the anticipated cost of your healthcare and the expected cost of your pharmaceuticals. The plans also have maximum out-of-pocket amounts. Many restrict you to a network of specific doctors, hospitals and pharmacies. So you need to compare regular Medicare to the Advantage plans and then the Advantage plans against each other.
The cost is usually what you must pay for Medicare Part B as determined annually by the government Centers for Medicare and Medicaid Services (CMS)—$135.50 per month in 2019—plus the insurance provider’s Medicare Advantage premium, which can run anywhere from zero to about $200 per month. Out-of-pocket limits, the most you will ever have to shell out without reimbursement no matter how complex your healthcare, runs from about $2,000 to $8,000. The costs and services of the many plans I have reviewed are detailed and transparent. But if you feel that you need assistance, you might be better off going to an insurance broker than doing your own research.
There is a Medicare Advantage enrollment period each year – January 1 to March 31 in 2019. This is your opportunity to switch from regular Medicare to Advantage. Once signed, you will have a three-month trial period during which you can switch back or switch to another Advantage plan. There is also an annual disenrollment period during which you can switch back to regular Medicare.
Does this make any business sense?
The following are all true:
- Some Medicare Advantage plans charge premiums of $0.
- Medicare Advantage plans offer expanded benefits compared to basic Medicare.
- Average premiums are estimated to decline 6.1 percent for 2019.
- For-profit Medicare Advantage insurers saw a profit margin in 2018 of five percent, twice the profit of other health insurance.
How can this be?
Well, the government pays the private plans to provide coverage. Supporting the option of private insurers in the market has proven to be less expensive to government than being the sole Medicare provider. There was concern when the change in administrations occurred in 2017 that government support would diminish. And yet political tailwinds appear behind Medicare Advantage – this administration boosted payments by 3.4 percent for 2019, demonstrating its commitment to the program.
Payments are now based on a pay for success model, adapted as part of the new approach to healthcare laid out in the ACA. Plans can receive bonuses from the Medicare Payment Advisory Committee if they achieve four or more notches on a five-notch scale that measures quality of care and customer satisfaction. There are also risk adjustment payments to the plans when additional health risks and illnesses are identified and addressed.
Modern medicine is overwhelming. When you spend time in today’s hospitals, you witness that even the most common, routine procedures involve extensive staff and expensive technology. You want the best treatment, but the costs can scare the heck out of you. Many Americans still avoid needed care due to fear of the costs. Now just over 20 years old, Medicare Advantage is an innovative private/public experiment to address our national wellness. Its expansion in both services and availability is welcome. Receiving the statement from your Medicare Advantage provider that details your recent healthcare costs but also indicates that you owe zero makes you feel good.