If you’re unhappy with your current Medicare plan, you’re in luck. It’s that time of year — Medicare shopping season.
For insurance companies that sell Medicare Advantage (MA) plans, now through Dec. 7 is sort of like the holiday season for retailers, with lots of advertising, promoting products and deals.
Read on to learn why Medicare beneficiaries should shop around but not necessarily buy a new plan. I’ll also explain how to avoid making bad decisions that could affect your health care — and your wallet.
Open enrollment seems like open season
Medicare’s Annual Election Period (AEP) – also known as open enrollment – is Oct. 15 to December 7 each year. That’s the time when Medicare enrollees can elect to make certain changes to their coverage. They can change from one Medicare Advantage plan to another, switch from original fee-for-service (FFS) Medicare to Medicare Advantage or vice-versa, and change prescription drug plans. Changes are effective January 1, 2024.
For insurance companies, it’s open season to target Medicare beneficiaries with television, newspaper, and direct mail advertising to get them to switch plans. Selling Medicare Advantage plans is a big and lucrative business, not just for insurance companies but also for brokers and agents.
Medicare’s open enrollment period is a great opportunity to improve how you get your health care and reduce how much you pay for it. But it can be complicated. So, I’m breaking this article into two parts. Part 1, this week, will help you decide whether a particular Medicare Advantage plan is right for you. Part 2, next week, will help you see if changing your prescription drug plan can save you money on your medications.
A tantalizing Medicare Advantage plan offer
Last week, I received a mailing that said in large print on the outside of the envelope, “2024 Medicare Advantage Plan Announcement” and “Increased benefits for 2024!” The flyer inside offered a plan with a $0 monthly premium, $0 copay for primary care visits, $0 prescription drug deductible, $0 copay for tier 1 and tier 2 prescription drugs, plus extra benefits for dental, vision, hearing aids, and over-the-counter products.
That got my attention.
The percentage of Medicare beneficiaries enrolled in Advantage plans has grown dramatically in recent years. A study published in Health Affairs Journal says that 80 percent of that growth is due to switching from Fee For Service Medicare to Medicare Advantage. A big reason for switching seems to be plans offering benefits that Fee For Service Medicare doesn’t cover, such as eyeglasses, dental care, and hearing aids, along with low or even zero monthly premiums.
Medicare Advantage plans take in more in premiums than they pay out for medical care
In health insurance, gross margin is the amount by which total income from insurance premiums exceeds the total cost of claims paid per enrollee per year. Gross margin is not the same as net profit because it does not account for things like administrative costs and taxes. But it is an indicator of the value of a business.
According to a study by KFF (previously known as the Kaiser Family Foundation), Medicare Advantage plans generate the highest gross margins of any type of health insurance, averaging $1,730 per enrollee. That’s more than double the gross margin for the next highest. It explains why insurance companies offer Medicare Advantage plans and promote them so heavily.
With over 50 percent of all Medicare beneficiaries, or about 31 million people, now enrolled in Advantage plans, that works out to more than $53 billion per year in gross margins for insurance companies just from Medicare Advantage plans.
Medicare Advantage plan money management
Given the reported gross margins for Medicare Advantage plans, you might ask how they can collect no monthly premium and yet still take in more than they pay out for medical and health claims.
Let me explain.
Medicare Advantage plans receive a negotiated fixed monthly fee per enrollee from Medicare. The estimated average amount in 2023 is about $1,200. They get that same monthly amount regardless of how often providers see a patient, and regardless of the kind of treatment they provide. If the patient needs complicated surgery or hospitalization, the plan still gets that same monthly flat fee. The only other money the plans get is from any copays they charge.
Medicare Advantage plans operate financially by managing their money through managing their members’ care. They do this by:
- Using tools such as network restrictions, which require you to get all of your care from doctors or other providers who are in their networks.
- Requiring referrals from your primary care doctor before you can access services or see a specialist.
- Requiring prior authorization from the insurance plan for a service that your doctor and your specialist say you need.
That last point is particularly troubling since that means someone at the insurance plan, not necessarily a medical professional, decides whether you need and will receive treatment.
How having the wrong Advantage plan could be a big disadvantage
In a recent story, I wrote about a man whose eye surgery was canceled at the last minute because the Medicare Advantage plan denied coverage.
Many Medicare Advantage plans are facing accusations of using prior authorization to improperly deny care that Medicare is supposed to cover. A report by the Department of Health and Human Services Office of the Inspector General about the use of prior authorization to deny medically necessary services said:
A central concern about capitated payment models—including the model used in Medicare Advantage—is the potential incentive for insurers to deny access to services and payment in an attempt to increase profits.Department of Health and Human Services
Most Medicare Advantage plans use the Health Maintenance Organization (HMO) model (although a growing number now are Preferred Provider Organizations (PPO)), where you are required to get all of your care from providers who are in-network. But sometimes, those HMO networks can be very limited since many medical groups don’t want to deal with the care denials and low reimbursement rates that allow the plans to make a profit.
These are all things I kept in mind as I looked into the Medicare Advantage plan advertised in the mailer.
Examining a Medicare Advantage plan’s details
The mailer I got didn’t really have much detail, so I went to the plan’s website. They make it easy to call someone to enroll, but I had to do some work searching the site to find actual plan details.
First, I searched the plan’s network for participating doctors because if you switch to Medicare Advantage plans or switch from FFS Medicare, you may have to find a new primary care doctor.
My current doctor is a board-certified internist. If I were changing, that’s what I would still want. The plan’s network doctor list has a key with icons indicating practice specifics, including whether doctors are accepting new patients, languages spoken, gender, and board certification, among others. Scrolling through the list for my county, I did not see a single “board certified” icon on the listings of internists near me. That doesn’t necessarily mean there are none. It may have just been a flaw in their website. But it was not encouraging.
The search also showed that the plan contracts with only two of the many hospitals in my area.
Next, I looked at the pages detailing the plan’s covered services and benefits. It did not surprise me to see that, other than primary care and basic services, most required referrals and prior authorization. That included some of the extra benefits. Remember, that’s one of the ways plans manage care to manage money.
I then looked for the plan’s star rating. The Centers for Medicare & Medicaid Services (CMS) rates Medicare Advantage and prescription drug plans from one to five stars based on a variety of measures. CMS publishes the ratings as an indicator of the quality of health and drug services the plans provide.
I would never recommend someone signing up for a Medicare Advantage plan with less than four stars or a drug plan with fewer than three. I had to search to find this plan’s star ratings. It turns out that the Medicare Advantage plan is unrated because it’s too new. However, the drug plan portion gets only two stars from CMS.
Is this a good plan?
This is not a plan that I would choose or recommend to most people. However, a senior who has to keep working past 65 and is living paycheck-to-paycheck without employer health coverage might find this or similar Medicare Advantage plans attractive. A plan with $0 monthly premiums and $0 primary care copays that also includes drug coverage, some dental care, and an allowance for eyeglasses could make a meaningful difference in someone’s budget.
Help evaluating and choosing a plan is available
Choosing a Medicare Advantage plan is about more than premiums, copays and extra benefits.
You won’t know if a given Medicare Advantage plan is the best choice for you without taking the time to look into its details, as I described. Each year, Medicare Advantage plans make changes to increase or decrease their premiums, deductibles and copays, add or drop benefits and make changes in providers. It’s important to analyze your current plan compared to any you are thinking of switching to.
But that can be difficult. In fact, only a minority of beneficiaries actually make the effort. However, there is help available. One source is insurance brokers. Some may represent all of the plans in your area and the ones that don’t must disclose that to you. New rules, now in effect, require brokers to help you understand how changing your Medicare plan might affect you.
If you’re concerned about sales pressure to buy a particular plan, you can get free, impartial information from your local State Health Insurance Assistance Program (SHIP)] office. SHIP is a federally funded program not affiliated with the insurance industry. They won’t try to sell you a plan.
Look before you leap (and switch Medicare plans)
That saying applies whenever you are shopping around and thinking about changing your Medicare plan. It’s especially relevant for someone thinking about switching from FFS Medicare to a Medicare Advantage plan. Changing your mind later and wanting to switch back could be a problem.
When you first enroll in FFS Medicare during an initial enrollment period or a special enrollment period, the companies that sell Medicare supplement plans cannot ask about pre-existing conditions or refuse to sell you a plan. However, someone who wants to switch from Medicare Advantage to FFS Medicare might have a problem getting a Medicare supplement plan, depending on their specific circumstances and where they live. The rules are complicated, vary by state, and contain exceptions that may be hard to understand.
If you’re considering changing your Medicare plan, contact your local SHIP to get personalized information.
Next week, I’ll explain why it’s smart to comparison shop for your Medicare prescription drug plan and how easy it is to do so. (Abe Wischnia, Consumer Rescue)
Before you go: Will Medicare cover you on an international trip? Don’t bet on it!