David Lipschutz, JD, associate director of Center for Medicare Advocacy, a national nonprofit law organization that works to advance access to Medicare coverage, Washington, DC. MedicareAdvocacy.org
You see the commercials touting Medicare Advantage (MA) plans as being a comprehensive solution to the limitations of traditional Medicare. Dental, vision, and hearing benefits—which are inexplicably lacking from traditional Medicare coverage—seem like great reasons to opt for what is advertised as a superior and even more cost-effective option. Lower premiums for more coverage: What’s not to like?
According to David Lipschutz, JD, of the Center for Medicare Advocacy, the reality of MA can paint a much different picture. Those two free dental cleanings each year could be costing you the ability to get the care and medications you need.
Medicare is a government-run program that is paid for through payroll deductions, general revenue, and Medicare premiums. From the moment we start working, we pay into the program. Medicare is nonprofit. While there’s certainly waste and administrative expenses, there are no shareholders or profit goals.
MA, on the other hand, is a program where mostly for-profit insurers get involved in managing the care of Medicare enrollees.
Traditional Medicare doesn’t cover everything that a person needs. In addition to Part A (hospital insurance) and part B (medical insurance), you have to choose a prescription plan (Part D), and many people also opt for a Medicare Supplement Insurance (Medigap) plan to cover copayments, coinsurance, and deductibles. Medigap plans don’t usually cover long-term care, vision, dental, hearing, or prescriptions.
This is where Medicare Advantage plans are advantageous. They usually offer some services that you can’t otherwise get covered, such as vision, hearing, dental care, and prescription coverage. They provide for one-stop shopping.
A lot of people want managed care programs in Medicare. There is a philosophical debate about what entity is in the best position to provide health care, and there are ideas about how private industry outperforms the government. Part of the initial rationale was that managed care delivers better care cheaper. But that hasn’t come to pass for a number of reasons, Lipschutz explains.
Because of the way it is set up, Medicare actually pays more to MA plans per enrollee than it spends on individuals in traditional Medicare. That allows MA plans to offer bells and whistles to increase enrollment.
But those benefits also come with some downsides. Most MA plans contract with a specific network of providers, which may not include those you want to see. Traditional Medicare is unique in that it does not limit care to a specific provider. There seems to be growing attention to provider groups and hospitals who no longer want to take MA plans due to insufficient payment, along with onerous prior authorization requirements.
More importantly, MA plans use—and often abuse—prior authorization. A 2021 report from KFF found that, in 2021, more than 2 million prior authorization requests were fully or partially denied by Medicare Advantage insurers, but 82 percent of them were fully or partially overturned on appeal.
Why deny the prior authorization to begin with? Because only one in 10 people appeal a denied claim, and that’s a whole lot of savings for the for-profit companies that run MA. The Office of the Inspector General with Health and Human Services issued a report last year that looked at these denials. They reported that 12 to 13 percent of the PA denials that they reviewed were inappropriate and should have been approved.
Refusal to cover medications, procedures, tests, or supplies that would have been covered under traditional Medicare has been a problem with some MA plans. In April, the Biden Administration issued new regulations barring plans from denying care inappropriately starting next year.
“Some people swear by Medicare Advantage plans, and some people swear at them,” Lipschutz quips. He advises people to first look at what coverage they have: Are you entitled to anything in addition to Medicare from a former employer? What does that look like? Do they offer an entire plan? About one in five people in MA plans are there because their former employer offers only MA plans as retiree coverage. (See Retirees Being Auto-Enrolled in MA).
You can switch from one MA plan to another during open enrollment once each year, but Medigap works differently. In many cases, you’re guaranteed enrollment only in the first six months after you enroll in Medicare. After that time, you can be rejected for pre-existing conditions. So if you go with an MA plan first and don’t like it, Medigap may be off the table. In limited cases, there are “triggering events” that give people a right to purchase a Medigap plan, and four states do provide the right to enroll in Medigap plans each year.
If you choose to go with an MA plan, you have to be an incredibly savvy customer to find out which plan is best for you. Before making a decision:
There have long been concerns about the solvency of the Medicare program, and the growth of MA plans is putting those fears into overdrive.
MA plans are being overpaid at such elevated rates that there’s a question of whether it’s becoming inevitable that Medicare will be privatized.
“I don’t think policy makers are thinking enough about what happens if traditional Medicare goes away,” Lipschutz says. “Medicare really sets the pace in a lot of ways in respect to quality measures, payment reform, supporting graduate medical education, and supporting rural health. A lot of other health systems follow Medicare’s lead. These are things that for-profit private insurers don’t engage in. There’s a lot to be lost.”
Increasingly, employers and unions that offer retirement health benefits are contracting with private insurance carriers to provide group Medicare Advantage benefits in place of traditional Medicare. In these cases, employees are automatically enrolled unless they affirmatively opt out.
Last year, 245,000 New York City retirees were automatically enrolled into an MA plan. This group enrollment was the result of an agreement reached between the union and the city that saved the city approximately 25 percent of what it was currently spending for supplemental (Medigap) insurance for the same retirees. The city was criticized for forcing its retirees out of traditional Medicare, causing retirees to have higher out-of-pocket costs and few health provider options.
“Medicare Advantage is an inferior health-care plan to the current original Medicare plan with a supplement,” Marrianne Pizzitola, a retired New York firefighter and president of the New York City Organization of Public Service Retirees, told Spectrum News in June. “Many of our doctors won’t accept this plan.”
The process for automatic enrollment of beneficiaries into employer or union-sponsored group MA plans is not explicitly authorized by the Medicare Act. Rather, in December 2000, a provision was added to the statute that gave the secretary of the Department of Health and Human Services the broad authority to “waive or modify requirements that hinder the design of, the offering of, or the enrollment in [such MA] plans.” This provision paved the way for the creation of the automatic enrollment process whereby employers or unions could automatically enroll their retirees into an MA plan so long as they provide advance notice and a mechanism to opt out.
It’s a lot of information to try to sort through. There are choices that could have long-lasting consequences. If you want help, be careful about agents and brokers that sell Medicare products. Some may have a financial interest in the choices you make. MA plans can pay high commissions, which can influence the advice you receive.
State health insurance assistance programs are federally funded and mandated to provide free and unbiased counseling. You can find them at https://www.shiphelp.org and 1-800-MEDICARE.