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What Health Care Reform Means for: Medicare Programs

In one of the most contentious issues in the health care debate, those enrolled in Medicare Advantage may see higher premiums and fewer plans to choose from if government subsidies are reduced to help pay for reform.

Nov. 17: This post has been updated.

Using results from a questionnaire we did with American Public Media’s Public Insight Network, we’re looking at how the proposed health care reforms will actually affect people facing common health care coverage situations. This is the third in a series (Part 1, Part 2).

Graydon DeCamp

Age: 75 Location: Elk Rapids, Mich. Work status: Retired Income: About $75,000, including SSI

Medicare Advantage has been a major flash point in the health care reform debate, giving fodder to opponents of reform who say that Medicare would be cut to pay for the proposals. Our analysis of the impact of reforms on one very satisfied Medicare Advantage member finds the changes would be a loss for many seniors, but a win for taxpayers.

About Medicare Advantage: The elderly can participate either in traditional Medicare, which is administered by the government, or in Medicare Advantage, which subsidizes managed care plans administered by private insurance companies.

The private plans offer many perks – low or zero cost-sharing, comprehensive prescription drug coverage, even gym memberships. But they also have a downside: As in other managed care plans, prior authorization is needed for many services, and members are limited to certain doctors and hospitals.

The relatively new Medicare Advantage is more expensive for taxpayers, however. In 2003, the Republican-controlled Congress wanted to make sure that seniors, especially those in rural areas, had access to a range of managed care plans. (This was a problem that plagued an earlier version of the Medicare managed care program.) So it agreed to pay health insurers more per person than it would cost if they were in traditional Medicare. Today that gap is about 12 percent.

Neither the House health care reform bill nor the Senate Finance Committee bill eliminates Medicare Advantage, but both would reduce what the government is willing to pay. The boon for private insurers from higher premium subsidies has long been a prime target for budget savings, especially among Democrats in Congress. So – not surprisingly -- cuts have turned up in the reform bills. Those provisions have proven to be some of the most contentious in the debate. President Barack Obama insists there are not cuts to Medicare in the health care reform packages, though many don’t see it that way.

His story:

Graydon DeCamp says he couldn’t be happier with his Medicare Advantage plan. He switched to it after his premium for traditional Medicare and private supplemental insurance skyrocketed to more than $1,000 a month even though, DeCamp says, he’s a healthy guy.

Now, in Medicare Advantage, he pays $148 per month for a plan that also features low co-payments. A few years ago he had two detached retinas, which resulted in five surgeries. His out-of-pocket expenses, he says, didn’t go over $500 or $600. Prescriptions that he takes for ongoing eye problems cost him $55 every three months.

“I’ve got no complaints,” he says.

What health reform may mean for him:

DeCamp’s premiums will probably increase, and he may have fewer plans to choose from. If the government decreases its subsidies to Medicare Advantage plans, the plans will likely pass their increased costs on to people like DeCamp, resulting in higher premiums. The House bill calls for $172 billion in savings over the next 10 years from reducing Medicare Advantage payments to insurers to the same amount paid for traditional Medicare – a significant chunk of the roughly $570 billion in savings from changes to Medicare overall. Likewise, the Senate Finance Committee’s bill calls for $470.2 billion in Medicare savings, of which 25 percent ($117.6 billion) would come from Medicare Advantage cuts. The bill would generate those savings by establishing a bidding process for plans.

Because DeCamp lives in northern Michigan, he may also see fewer Medicare Advantage plans to choose from as subsidies under both proposals decrease.

Overall, DeCamp would likely fare better under the Senate Finance Committee proposal, which includes more protections to soften the impact of reduced subsidies. If the bids include significant cuts to benefits, the government would temporarily step in.

The proposed reforms also call for some improvements to Medicare Advantage coverage. The Senate Finance bill prohibits managed care plans from charging people more than traditional Medicare for certain services, such as chemotherapy, renal dialysis and skilled nursing care. It also offers bonuses to plans that offer superior quality of care and care coordination. And the House bill provides bonus payments to high-quality plans, and requires that a list of high-quality and improved-quality plans be provided on the Medicare Web site.

If his plan becomes too expensive, DeCamp could switch back over to traditional Medicare. Under both bills, preventive services would be free (see the Senate provision and the House’s). And both have provisions for reducing fraud and waste, which drive up Medicare costs.

Update:This post has been updated to reflect that Medicare Advantage plans include managed care plans, and a similar category of managed care plans called Preferred Provider Organizations, or PPOs. While HMOs generally require approval from gatekeeper doctors for many services, PPOs encourage members to use providers in the network by imposing higher cost sharing for outside services.

I subscribe to an Advantage Program and they have all ready raised my rates 120% in one year!
They claim that congress has all ready cut payments to them.
Couple that with no cost of living increase in Social Security and you have a crisis brewing in the older population.

Despite the federal money, MA may not be a bargain, as the plans require subscribers to use doctors, labs, hospitals and other facilities in the MA’s network, with which the insurer has contracts. If the best facility or surgeon for a patient’s condition is not in the network, the insurer can and often does second-guess and even refuse to pay for services it believes are unnecessary or can be performed by in-network doctors. Because of such MA plan restrictions, some of the best hospitals in the nation, such as Baltimore’s Johns Hopkins, do not accept MA plans.

CurmudgeonJohn

Nov. 17, 2009, 4:16 p.m.

I’m also a happy camper in a Medicare Advantage plan but because I live in SW Florida , I had 58 plans to choose from and my plan costs no more than my Part B costs. It helps to live where there are lots of docs and medical facilities.

The simple answer to the entire issue is to go to a single government payor such as Medicare whose administrative costs are 3% versus the 17+% of the private insurance industry. So long as we continue to permit huge corporate profits to remain in place, costs will rise and universal coverage will elude us. Health care is like construction or military contracting, a cost plus business. So the bigger the cost, the bigger the plus.

I also have a Medicare Advantage plan and love it!  I pay no premium beyond Part B and I enjoy excellent coverage, including prescriptions and health club membership.  My friends who have regular Medicare are paying thousands a year for Medigap and Part D.  I am so disappointed in Obama who said if you like your coverage you can keep it but neglected to mention he wants to hurt MA plans financially so that they will have to raise rates in order to stay in business.

While it is good for seniors to get adequate healthcare, it is also a big part of the budget crisis.  Medicare is wonderful for seniors, but a burden for the rest of the working population.  The US government has become a bit like GM and Ford, struggling to keep its books balanced while supporting a large group of dependents.  Sure supporting retirees sounded like a great idea; to give something back to the people that got us to where we are.  However, in both cases there has been no effective long term plan for supporting this many seniors at once.

The ultimate question is, can a capitalist society support such a large welfare population?

A couple of points:

1. It’s not just taxpayers in general who pay for the extra funds given to Medicare Advantage. It’s also everyone in traditional Medicare who is suffering steep rises in the “part B” physician coverage.

According to testimony in January 2008 by the Medicare Payment Advisory Commission (MecPAC):

“Medicare pays far more for each beneficiary who opts for [a Medicare Advantage] plan than it would if they stayed in [traditional Medicare].  In addition to promoting inefficiency in [Medicare Advantage], this misalignment increases the burden on taxpayers and beneficiaries, who must pay higher Part B premiums, whether they are in managed care plans or not.”

2. A thorough history of Medicare Advantage in the journal Health Affairs in Nov. 2008 shows that it was originally designed to save Medicare money by utilizing a classic HMO model. Extra benefits were added only if the plan really saved money.

That’s how a predecessor plan worked, more or less, for a few years in the 1980s. But relentless lobbying by the private plans killed even pilot plans for greater savings through competitive bidding, even though early bids showed savings of over 20%. Finally, the Medicare Modernization Act of 1997 sneaked in the provisions that now greatly overpay the Medicare Advantage plans.

The Health Affairs article, published online and little-noticed, could fuel some fine investigative reporting on the obvious lobbying heft that killed the original savings. It’s here: http://content.healthaffairs.org/cgi/content/full/28/1/w29 (subscription barrier)

As they have from the beginning, the Medicare Advantage plans use bonus benefits like health club memberships to attract the healthiest customers. Then, when the members face a life-threatening illness, they find out how limited their really big choices are.

The fear campaign that insurers are running against any reform of Medicare Advantage is just disgraceful.

Correction to my just-sent comment: The Medicare Modernization Act passed in 2003, not 1997

My wife and I are in our 70s and have Medicare Advantage with Kaiser-Permanente.  Our copays for doctor visits and prescriptions are low, and we have online access to our medical records, past visit reports, online prescription renewals delivered by mail, and email contact with our primary physician and our specialists.  We are reminded by phone when we are due for a checkup, and our conditions are closely monitored.  We couldn’t ask for better care.  - Mel Roseman

Gary Richardson

Nov. 18, 2009, 2:18 p.m.

I, too, was a happy Medicare Advantage user for the first couple of years. I signed up for True Blue when I started Medicare four years ago, mainly because it promised virtually free hospitalization coverage, which I figured would be the expense I could least afford should I need it. The $10 to $20 doctor-visit copay and dental care were also attractive; and I lost only one of my previous doctors, who doesn’t take Medicare patients.

I was pleasantly surprised when Blue Cross actually lowered the monthly premium by $10 after the first year. However in year three, I started repeatedly receiving benefit denials, each of which (so far) has been reversed on appeal. They were mostly petty things—a $90 lab test, a referral whose paperwork was botched by the docs, a second annual $80 teeth-cleaning, etc.

(I have periodontal disease under control due to regular maintenance. True Blue says they pay for a cleaning every six months. My in-network periodontist says I need it quarterly. So, we compromised at three annual cleanings. I go to him once a year and pay out of my own pocket because Blue Cross won’t pay for the more costly, “deep” cleaning at his office even though he’s an in-network specialist who has prescribed the procedure. I go to my regular dentist for cleaning twice a year. There is no way to schedule trimester cleanings so that two fall into separate six month periods, so Blue Cross has denied payment for more than one cleaning a year. Last year I won an appeal of this denial. This year, I was denied payment of the second cleaning again. When I called customer service to point out last year’s successful appeal, I was told that last year’s reversal was “educational” and would not be repeated; my current appeal is pending! I cite this detail to illustrate what a hassle it is to deal with these petty denials—while realizing how much Blue Cross is receiving from Medicare just to have me on their rolls. I wonder how it goes for those who don’t have my patience—or understanding of the industry bureaucracy standing between me and my doctors.)

I am pretty healthy and have cost the plan far less than it receives each month from Medicare (more than $600, I am told) and me ($94). Now Blue Cross has announced a premium increase of more than 20 percent for next year—probably in anticipation of the cuts proposed but not enacted in the reform legislation or likely to be implemented next year.

I am not surprised that Congress wants to trim the Advantage program. In my experience, True Blue seems like another insurance industry boondoggle. In Idaho, the Blues are supposedly non-profits; yet, they pay lobbyists to work against health care reform. I suspect that the negative spin on the proposed Medicare Advantage changes has been generated by an insurance industry protecting the golden egg it hatched.