Advantage Plans Overtake Original Medicare

A Medicare Advantage plan may not be the right solution for everyone, depending on the drug formulary. For some people, their medications drive costs, and every Advantage pkan has a set formulary. People save money by checking every year at Medicare.gov to see which plans are the best for them, and that can mean getting a medgap policy and changing their drug plan yearly to the most cost effective plan for them as formularies change every year- especially if they are on a lot of medications. If people are just on a few generic meds then an Advanrage plan can make sense for them. One other thing couples make the mistake on is thinking they need the same plan. Again, things vary and a couple could save money by one having a different plan that meets/tailired to their specific need - like medication.

Thanks Kim, that is some very helpful info. I particularly like your point that couples might not need the same plan. That is certainly the case with my wife and I, who are both on original Medicare. I chose a high deductible plan, she likes the assurance of low deductibles and more coverage.

“If an ice cream firm can offer ice cream for free because of a subsidy, its market share will of course grow against firms that charge for ice cream. The cause is not better ice cream; it is free ice cream.” - Don Berwick MD and former Administer of the Centers for Medicare & Medicaid Services talking about Advantage plans.

MedPac the agency that advises Congress on Medicare recently released a report on Medicare. Here is the section dealing with Advantage plans: https://www.medpac.gov/wp-content/uploads/2023/07/July2023_MedPAC_DataBook_Sec9_SEC.pdf

The link under for further reading says the total for Advantage is 30.19 million not 15 million as indicated in the body of the post.

“If an ice cream firm can offer ice cream for free because of a subsidy, its market share will of course grow against firms that charge for ice cream. The cause is not better ice cream; it is free ice cream.” - Don Berwick MD and former Administer of the Centers for Medicare & Medicaid Services talking about Advantage plans.

MedPac the agency that advises Congress on Medicare recently released a report on Medicare. Here is the section dealing with Advantage plans: https://www.medpac.gov/wp-content/uploads/2023/07/July2023_MedPAC_DataBook_Sec9_SEC.pdf

The link under for further reading says the total for Advantage is 30.19 million not 15 million as indicated in the body of the post.

I really appreciated Mike’s link to the Medpac website. It was very interesting and educational. As I’ve said before on topretirements, it should always be an informed and educated individual decision as to what Medicare plan is best for each person. Some will benefit more from a supplement, and some from an Advantage plan (which may vary somewhat in each county they’re offered). The regional PPO Advantage plans offer a much larger network throughout much of the US. The HMO Advantage plans are limited to a much smaller geographical area.

What I take away from the MedPac report is Advantage plans were touted as a way to provide better care at lower cost and it has been a failure in both departments. According to MedPac in 2021: “Our review of private plan payments suggests that over a 35-year history, the many iterations of full-risk contracting with private plans have never yielded aggregate savings for the Medicare program. Throughout the history of Medicare managed care, the program has paid more—sometimes much more—than it would have paid for beneficiaries to have remained in fee-for-service (FFS) Medicare.”

Medpac estimates that Advantage payments are 6% higher than for FFS Medicare and “would be higher if it included an adjustment for the effect of favorable selection—where payments to plans are systemically greater than plans’ spending for their enrollees.” A study at the University of Southern California estimates that adjustment at 14%. Advantage plans could be costing 20% more than fee for service Medicare, yet according to MedPac, Advantage plans bids average 83 percent of CMS’s FFS spending projections for 2023. My math says Advantage plans are costing 37% more than the bid they submit to Medicare. How does anyone consider that cheaper and why is that practice allowed to continue?

According to MedPac the reason that Advantage plans cost more is “coding intensity” a plan that incentives plans to make the patient seem sicker than they are thereby increasing the plans’ monthly payments and rebates. The average rebate to Advantage plans is $206 for each enrolled per month, that’s almost $75 billion per year. The rebate is how Advantage plans provide “FREE” additional benefits such as dental and hearing benefits, food allowances, gym memberships and transportation.

Then there are bonus payments for “quality”. Spending on Advantage bonus payments has increased every year since 2015 and will reach at least $12.8 billion in 2023, an increase of nearly 30% since 2022. There is no evidence that the quality of Advantage plans is better than FFS. MedPac has said there is no way to judge quality due to the poor data supplied by Advantage plans.

The road to Medicare insolvency and privatization runs through the Advantage scheme.

From a new report on the amount Advantage plans overcharge Medicare and how they do it:
"By our estimate, and based on 2022 spending, Medicare Advantage overcharges taxpayers by
a minimum of 22% or $88 billion per year, and potentially by up to 35% or $140 billion. By
comparison, Part B premiums in 2022 totaled approximately $131 billion, and overall
federal spending on Part D drug benefits cost approximately $126 billion. Either of these—
or other crucial aspects of Medicare and Medicaid—could be funded entirely by eliminating
overcharges in the Medicare Advantage program."

https://pnhp.org/system/assets/uploads/2023/09/MAOverpaymentReport_Final.pdf

I’m interested in the the source of this new report. I suspect there may have been overcharges by carriers who offer Advantage plans, but would like to review the source of the report. Any such overcharges have nothing to do with overcharging those who actually have Advantage plans. It’s a company-government overpayment issue that should be resolved.

The title page of the report identifies the group that wrote the report, Physicians For A National Health Program. PNHP is a 25,000 member organization that advocates for a single payer health system. https://pnhp.org/about/pnhp-mission-statement/ The report has 37 references in the endnotes many with links.

Its not that plans are being over paid, they are submitting fraudulent claims. The most recent example from the US Department of Justice: "The Cigna Group, headquartered in Connecticut, has agreed to pay $172,294,350 to resolve allegations that it violated the False Claims Act by submitting and failing to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan enrollees in order to increase its payments from Medicare. https://www.justice.gov/opa/pr/cigna-group-pay-172-million-resolve-false-claims-act-allegations

Office of Inspector General for Health and Human Services investigations, Department of Justice lawsuits, MedPac reports, Government Accountability Office studies and news reports document a pattern of falsifying claims to receive higher payments from Medicare. 8 of the 10 largest insurance companies covering 60 % of the Advantage market have been accused of fraudulent billing. An online search for Medicare Advantage Fraud will give hours of reading material.

It is a fraud issue not an overpayment issue. Fraud is rampant, it is how the Advantage scheme functions and wildly profits from and it is largely unpunished. Couple the fraud with a revolving door between the health industry and regulatory agencies and we have a recipe for bankrupting Medicare.

I don't understand the "Any such overcharges have nothing to do with overcharging those who actually have Advantage plans. It’s a company-government overpayment issue that should be resolved." reasoning. The fraudulent charges are paid with OUR money (there is no such thing as government money) that we payed into the Medicare for decades and pay today with OUR Part B premiums. How is that not overcharging Advantage beneficiaries? How is that not overcharging those of us that don't want an Advantage plan but are forced to subsidize it anyway and it crooked business plan? What other product or service would you accept such practices from?

MedPac the advisory commission to Congress on Medicare agrees with PNHP on its estimate of overpayments to Advantage plans. Page 27 of its latest report https://www.medpac.gov/wp-content/uploads/2023/10/MedPAC-MA-status-report-Jan-2024.pdf

The report also expresses concerns about quality of care, the quality bonus system, the inadequacy of insurer provided data, financial incentives to make Advantage plans appear sicker than they are that makes Advantage plans 23% more expensive that fee for service Medicare.

I have stayed with original Medicare and have a high deductible supplemental policy. Most of the Advantage plans have a much higher maximum out of pocket annually than my high deductible supplement.

I looked into plans a few years ago and nothing has changed in my decision for regular Medicare. Two agents told me there was "no advantage to Advantage" and I found that to be true. I'm in a small town and the major hospital with many doctors attached are not taking Advantage now. It's a mess.

I write only about my experience with Medicare Advantage (MA). I’ve had such plans since I became eligible for Medicare ten years ago, all at a $0 monthly premium. Last September I was in the hospital for six days with septic shock that came on suddenly. I had hundreds of lab tests done and saw at least five doctors while in the hospital. My bill for all of that, after MA insurance paid its part, was $1120, which I covered out of my HSA plan. Yes, $1120 isn’t chicken feed, but the savings I’ve had from paying $0 in monthly premiums every year has been a little over $20,000 based on average costs of Medicare supplement and its required Part D drug plans, which cost extra. My maximum out of pocket cap was $5300, which, of course, I didn’t come close to. MA plans can work well, but they’re not for everyone. Always consult a qualified and licensed insurance advisor when choosing a Medicare plan. There is no cost to you and any commission they receive is the same for each plan, so they have no incentive to steer you toward any particular company.

Humana has announced it is ending some Advantage plans and cutting benefits in 2025 to boost profits. Other companies are likely to do the same. Humana says the greatest cuts are in 5 states: Florida (742,591), North Carolina (456,318), Georgia (336,617), Texas (289,120) and Illinois (256,081)
Despite being over paid by as much as $140 billion the insurance industry says government payments are too low.

Good news from Medicare are new requirements in addressing loopholes in agent compensation that incentivize steering enrolles into Advantage and regulations to restrict selling personal data by third party marketing organizations that lead to intrusive marketing phone calls and aggressive marketing tactics.

A recent Senate hearing showed bipartisan support for reigning in the abuses caused by preauthorizations in Advantage plans. A proposed law from 2021 to regulate preauthorizations never was enacted. In 2021 healthcare insurance industry group America’s Health Insurance Plans spent $11.3 million on influencing policy. In 2023 the total was $13 million.

Recent statements from Aetna after its stock fell to a 15 year low indicate they will be raising premiums, cutting benefits like dental and vision coverage and leaving counties that are not profitable enough in 2025.

From the CEO of Aetna: “We are committed to improving margin in Medicare Advantage and we will do so by pricing for the expected trends. We will do so by adjusting benefits and exiting service counties. And we are committed to doing that.”

From the CFO: “So, we’ve given you all the pieces to kind of understand why we think it (Medicare Advantage) will lose a significant amount of money this year. But as you think about improvement there, obviously there’s a lot of work that we still need to do to understand what benefits we’re going to adjust and what ones we can and can’t…To the extent that we don’t believe we can credibly recapture margin in a reasonable period of time, we will exit those counties…(And) as we’ve all mentioned we’re going to be taking significant pricing actions and really it’s going to depend on what our competitors do.” “Could we lose up to 10% of our existing Medicare members next year? That’s entirely possible, and that’s OK because we need to get this business back on track.” The 420,000 people losing their Aetna coverage may not think that is OK.

While complaining about low payments from Medicare Aetna was able to find $19.3 billion for stock buy backs between 2007-2022 and could afford to pay its CEO $21.3 million in 2022. Aetna profits were $13.7 billion in 2023.

Since the extra benefits are paid by a rebate from Medicare will the insurance companies no longer receive the rebate or will the rebate continue while cutting extra benefits?

In its latest 2024 report MedPac says 33.1 million or 54% of Medicare beneficiaries are now covered by Advantage plans. As plan participation increases so do costs. On average Advantage plans say they can provide coverage for 18% less than what Medicare spends on traditional fee for service spending but end up costing 22% more, an increase of 10% since 2023. While costing 22% more Advantage spends 9% less on treatment than Medicare does.

MedPac, as in many previous reports, says the program for assessing Advantage quality is flawed and not reliable. The quality bonus program is currently a $15 billion annual payment.

Since 2007 Medicare has spent $612 billion on Advantage overpayments with estimates of $88 -$140 billion more in 2024. Going forward Medicare may spend an additional $1.6 trillion on overpayments by 2033 which will increase our premiums by $260 billion.

Medicare trustees report a decrease of 8% in spending would bring solvency long term for Medicare. What would not paying $2.2 trillion of overpayments expected by 2033 do the solvency of Medicare?

Between 2007 and 2023 the insurance lobbying group America's Health Insurance Plans spent $158.4 million on lobbying. If half of AHIP lobbying money spent since 2007 has been spent on advocating for Advantage plans they have returned a 776,000% return on investment to their clients with more to come by 2033.

Centene is the latest company to make cuts to its Advantage plans. It plans to exit Alabama, Massachusetts, New Hampshire, Rhode Island, New Mexico and Vermont in 2025 affecting 37,000 people.

Mehmet Oz has been nominated to head Centers for Medicare and Medicaid Services, the agency that runs Medicare and Medicaid. He is an advocate for privatizing Medicare through the Advantage system.

He was defeated in 2022 when he ran for Senator from Pennsylvania. His financial disclosures at the time showed he owned up to $550,000 in United Healthcare, the country’s largest Advantage insurer, and up to $50,000 in CVS Health, which owns Aetna insurance. He and his wife owned $8.5 million in investments in the health care sector. Despite his public challenges to “big pharma” he was also invested in pharmaceutical companies Johnson & Johnson and Abbott Labs. During Covid he advocated for the use hydroxychloroquine while owning stock in Thermo Fisher Scientific, a supplier of the drug and McKesson a distributor of the drug.

This is one giant step closer to turning over the Medicare program to Wall Street .

Mike, what could this mean for the Medigap plans? We have an opportunity to move from our MA plan to a Medigap plan and I am dazed and confused about it all. It seems like our company MA plan is a good one, but I don’t trust them anymore.

Daryl,
I think the goal is getting every senior in an Advantage plan or worse. The amount of money to be made is the driving force, not quality affordable health care and Advantage plans are a cash cow.

Maybe people don’t recognize the name Mehmet Oz, he is best known as TV personality Dr. Oz. When Oz ran for a Senate seat in 2022 he wanted Advantage plans for everyone in the country, not just Medicare. I doubt he has changed his mind. As I pointed out in my previous post he has a financial stake in promoting Advantage plans and his conflict of interest is huge. In 2019 under Trump, Medicare quietly started a plan called Direct Contracting Entities to hand traditional Medicare to the commercial insurance industry by 2030. It took the Advantage business model, made it worse and unfortunately Biden did next to nothing to stop the scheme. I expect DCE to make a resurgence!

Don’t be overwhelmed with choosing a Medigap policy, it may not be as daunting as it seems. I know there are several Medigap plans but realistically you might need to consider only two. Why only two? Plan C and Plan F are not available if you turned 65 on or after January 1, 2020. Even if you qualify by age they will have an older, sicker, shrinking pool of enrolles to spread the risk to which will drive premiums higher and to my thinking Plans A,B,D,K,L,M offer poor coverage.

That leaves Plans G and N. This year my wife and I switched from Plan G to Plan N and are happy we did. The Plan G premiums had drastic price increases, soon the premium would be double what we originally paid. With Plan N we do have $20 copays, so if you think you will be needing healthcare several times a month it may not be a good option as your copays and premium may end up costing more than the premium for Plan G with no copays. The second difference is Plan N does not cover the excess charges that Plan G does. Doctors can choose not to accept the amount Medicare pays for service and can charge up to 15% over the Medicare amount, resulting in an excess charge. Our research showed the excess charge is a minor issue as 98% of doctors accept Medicare as full payment. Go to Medicare’s website and look for the tab “Providers & Services”, it will show what providers accept Medicare as full payment. The excess charge does not apply to hospitals, only to doctors.

I would be wary of insurance brokers giving advice, their payment is directly tied to what plan they sell you. They get a percentage of what the premium is, so selling you a higher premium plan is in their interest. I have never used State Health Insurance Assistance Programs but others on the blog recommend them for help with making a decision.

This whole situation scares us. We have traditional Medicare Plan F and the separate D drug plan. At our ages now the premiums are well worth the cost as all doctors, hospitals, emergency care, etc. etc. gladly take our insurance and we have no out of pocket expenses. If traditional Medicare goes away under the new administration and Dr. Oz this will greatly impact the quality of the care we get now and also our budget. To us there is NO "Advantage" to the cheaper plans. In our area, quietly many doctors are not taking certain Advantage Plans anymore.
.

Mike, you are a gift! Thank you for all your research and information.

Editor's Comment: We agree!

Medicare proposed changes to the Advantage program:
“On November 26, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would revise the Medicare Advantage (MA) Program, Medicare Prescription Drug Benefit Program (Part D), Medicare Cost Plan Program, Programs of All-Inclusive Care for the Elderly (PACE). The Contract Year (CY) 2026 MA and Part D proposed rule aims to hold MA and Part D plans more accountable for delivering high-quality coverage so that people with Medicare are connected to the care they need when they need it. This proposed rule includes more policies to remove unnecessary barriers to care stemming from the use of inappropriate prior authorization by clarifying requirements for plan use of internal coverage criteria and proposing guardrails for the use of artificial intelligence (AI) to protect access to health services. It would also expand access to transformative anti-obesity medications under the Medicare Part D and Medicaid programs, helping to ensure more Americans have access to these medications. The proposed rule further promotes access to behavioral health care providers and improves the administration of MA supplemental benefits. Other proposals take steps to ensure that MA and Part D plans compete on the things that matter to Medicare consumers such as further addressing marketing practices that are misleading to seniors and persons with disabilities and improving consumer tools on Medicare.gov.”

The announcement talked about the cost of benefits such as $0 premiums, vision and hearing care through Advantage plans. Those ”free benefits” will cost taxpayers over $79 billion in 2026 and $500 billion over a 5 year period starting in 2026.

https://www.cms.gov/newsroom/fact-sheets/contract-year-2026-policy-and-technical-changes-medicare-advantage-program-medicare-prescription