Where’s the Advantage?

 Where’s the Advantage?

By Peter Galvin, MD

It was estimated that by the end of 2023, more than half of the 66 million beneficiaries of Medicare would be enrolled in a Medicare Advantage plan. This constitutes a historic milestone in the evolution of a unique federal program that has profoundly benefitted older and disabled Americans and deeply influenced the evolution of our health care system. It is safe to say that when President Johnson and his congressional allies secured the enactment of Medicare in 1965, they never imagined that most eligible Americans would be enrolled in the types of payment and service arrangements that Medicare Advantage offers, rather than the traditional fee-for-service program. How did this happen?

The original purpose of including private plans in Medicare was to allow the Medicare program to benefit from the reputed efficiencies of the private insurance market, for example, the few health maintenance organizations (HMOs) like Kaiser Permanente that existed when Medicare was born. As managed-care plans spread, Congress made legislative changes to make it easier for Medicare beneficiaries to enroll in them. The moniker “Medicare Advantage plan” first appeared with the enactment of the Medicare Modernization Act in 2003. The major rationale for enabling enrollment of beneficiaries in private plans was to save money. Traditional Medicare pays providers directly on a fee-for-service basis, with no limit on either the total amount paid per year, plus no limit on the beneficiaries’ annual out-of-pocket expenses.

Advantage plans must cover Part A (inpatient costs) and Part B (outpatient costs) with the option to cover Part D (prescription) costs, which most plans do. In addition, most cover dental and vision services which are not covered by traditional Medicare. They also cap enrollees’ out-of-pocket costs. However, most plans have limited provider networks and require prior authorization for most specialist referrals and complex care (i.e., MRIs, CTs, and many other procedures). Out-of-network coverage is almost non-existent. Medicare pays the plans a pre-set annual amount per provider, regardless of the amount of care the beneficiary receives, but these private insurers are in business to make a profit. The more they spend per patient, the less they make. So, they deny most requests for pre-authorization (that was my experience, which is why I hated dealing with these plans). Unfortunately, the patient gets the short end of the stick (which I also hated).

Despite all the above, enrollment in these plans has exploded, mostly because of aggressive marketing, generous supplemental benefits, limited out-of-pocket costs, and rebates. The result is that instead of saving money, the explosion of Advantage plans has actually increased federal per capita Medicare spending. Rebates and the supplemental benefits they fund have sharply increased costs, not to mention aggressive, if not abusive, marketing by brokers that are paid huge commissions. TV ads during open enrollment season have also exploded. A key question has arisen, that being can Medicare continue to afford and pay for rising costs due to Medicare Advantage? It has become clear that to continue to fund the Medicare program, three possibilities have arisen, namely 1. Raise traditional Medicare Part B/D premiums or, 2. Raise taxes including Medicare taxes or, 3. Eliminate the Medicare Advantage programs. Obviously, all three are politically suicidal but, ultimately, we cannot continue on our present course for much longer.

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