Are Medicare Advantage plans economically better than regular Medicare plans? Medicare Advantage plans were created as a way for private insurers to help control costs of Medicare. Instead of saving taxpayer money, for-profit insurers successfully lobbied the federal government to overpay them billions of dollars significantly more than the cost of covering patients in traditional Medicare plans.
Private insurers marketing Advantage plans have found ways to push undesirable high cost patients into traditional Medicare by charging high co-payments for drugs and services. Ambulance services, home health care, partial hospitalization and inpatient services all have had shifts to higher co-pays, which saves private insurers selling Advantage plans billions of dollars. These Advantage plans are good for private insurers by reducing their costs of care by 24 percent fewer diagnostic tests, 38 percent fewer flu shots, and 15 percent fewer colon cancer screening tests.
Advantage plans charge higher premiums for the sickest patients by cherry picking healthier seniors and avoiding the sickest. There is little “advantage” cost-wise in throwing tax dollars to private insurers whose overhead averages 30 percent, compared to 3 percent for traditional Medicare, and gives greater profit margin.
Private insurers up-code diagnoses to gain higher federal reimbursements which cost taxpayers $2 billion a year. Medicare Advantage plans are a popular choice for seniors because they come with richer benefit designs and reduced financial exposure for patients. The tradeoff is narrower networks of providers and hospitals.
More than one-third of Advantage plans do not include a single National Cancer Institute center. Twenty-seven percent of enrollees leave Advantage plans because of problems getting needed care. The Part D pharmacy benefits in Advantage plans is made possible because of the huge overpayment by the federal government to private insurers to market these plans. Advantage plans are not healthcare cost savers.
Richard A. Damon, MD