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Feeling trapped by your Medicare Advantage plan? You’re not alone

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Abe Wischnia

Special features columnist

Imagine needing a medical procedure only to find that your Medicare Advantage plan is denying coverage. Unfortunately, that’s not an imaginary scenario. In fact, it’s very real and happens millions of times a year for seniors trapped in Medicare Advantage plans. The problem of unfair coverage denials is finally getting more national attention. But it’s too late for those who were wrongly denied care.

When you’re new to Medicare, probably the most critical decision you have to make is whether to go with Original Medicare or with Medicare Advantage. 

Your choice will affect which doctors, specialists, and other providers you can see. Not only that, but which hospitals you can use, and whether you will get the medical procedures you need.

Yogi Berra famously said, “When you come to a fork in the road, take it.”

Facing the decision between Original Medicare and Medicare Advantage is like that proverbial fork in the road. And as Berra suggested, you have to choose one way or the other.

If you’re going to choose Medicare Advantage, you should do so with your eyes wide open. Here are some things to consider.

Prior authorization and denial of care

It’s important to understand how the insurance companies that run the Medicare Advantage plans make them work financially.

Medicare Advantage is what’s called a capitated payment model. That means that private insurance companies contract with Medicare to provide the required benefits in exchange for a negotiated, fixed monthly fee per member from the government. That’s in addition to whatever the plans charge for premiums and copays.

The national average capitated fee in 2024 is estimated to be between $1,150 and $1,200 per month. Generally speaking, that capitated payment does not change regardless of the services the patient uses. Even if the patient needs major surgery, the plan still gets only the capitated amount. 

In order to control costs, Medicare Advantage plans are allowed to use a tool known as prior authorization. That’s a process by which someone at the plan – not necessarily a medical professional – is allowed to review your doctor’s recommendation and approve or deny coverage before a test or procedure can be done. The plans say that’s a good thing because it reduces unnecessary tests and procedures, saving Medicare money.

However, plans have been accused of using prior authorization to improperly deny care that the Medicare program is supposed to cover.

The Office of the Inspector General of the Department of Health and Human Services issued a report on problems with prior authorization that began with this statement:

A central concern about the capitated payment model used in Medicare Advantage is the potential incentive for Medicare Advantage Organizations (MAOs) to deny beneficiary access to services and deny payments to providers in an attempt to increase profits. Although MAOs approve the vast majority of requests for services and payment, they issue millions of denials each year, and CMS annual audits of MAOs have highlighted widespread and persistent problems related to inappropriate denials of services and payment.

Office of the Inspector General

Artificial Intelligence and Medicare Advantage

As Consumer Rescue’s publisher, Michelle Couch-Friedman, has written, artificial intelligence is invading all areas of consumer support. Now, artificial intelligence is playing a role in prior authorization and coverage denials. 

A recent report by Stat News, a publication for the healthcare industry, said some Medicare plans are using AI to justify cutting off rehabilitative care for seniors in nursing homes:

Health insurance companies have rejected medical claims for as long as they’ve been around. But a STAT investigation found artificial intelligence is now driving their denials to new heights in Medicare Advantage …

Older people who spent their lives paying into Medicare, and are now facing amputation, fast-spreading cancers, and other devastating diagnoses, are left to either pay for their care themselves or get by without it. If they disagree, they can file an appeal, and spend months trying to recover their costs, even if they don’t recover from their illnesses.

Stat News

Some of the largest Medicare Advantage insurance companies are now facing class action lawsuits growing out of these allegations.

Does Medicare Advantage provide better care?

Medicare Advantage plans argue that their focus on preventative medicine and coordination of care results in better health outcomes for their members. That can be the case for routine healthcare and for younger seniors who are in good health and seldom need to see a doctor.

But that’s not necessarily the case for those with complex health issues, such as cancer.

Consider a study published in the Journal of Clinical Oncology. That’s the professional publication for cancer doctors.

The researchers looked at the records of more than 76,000 Medicare beneficiaries who had surgery for cancers of the lung, esophagus, stomach, pancreas, liver, colon, or rectum. The patients were about equally divided between Advantage and traditional Medicare.

The records showed that those in Medicare Advantage were less likely to have their surgeries at “high-volume hospitals,” which do a large number of such procedures and presumably would have greater expertise. Here is what their study concluded:

Enrollment in Medicare Advantage plans is associated with lower estimated hospital costs. However, compared with TM, Medicare Advantage beneficiaries had lower access to high-volume hospitals and increased 30-day mortality for stomach, pancreas, or liver surgery.

Bottom line: The plans spent less on hospital costs, and many patients had a higher likelihood of dying in the 30 days following surgery.

Data shows that seniors with serious medical conditions in, what will turn out to be, their last year of life try to switch from Medicare Advantage back to Original Medicare at disproportionately high rates compared to other Medicare Advantage enrollees. A study by the Government Accountability Office said, “Stakeholders told GAO that, among other reasons, beneficiaries in the last of year life may disenroll because of potential limitations accessing specialized care under Medicare Advantage.”

Trapped in Medicare Advantage

If you’re not happy with your care, it’s easy to switch from Original Medicare to an Advantage plan. But moving the other way can be difficult and often effectively impossible.

Here’s why Medicare Advantage enrollees with serious health problems who try to switch feel trapped. When you first enroll in Medicare, you can get a supplement plan, also known as a Medigap, without being asked about preexisting conditions. You cannot be denied or charged more because of your health. In Original Medicare, you need a Medigap plan to cover deductibles and copays.

But if you’ve been in Medicare Advantage for more than a year, you might not be able to get a Medigap plan. After that first year, insurance companies can screen you for health issues and decline to sell you a plan because of preexisting conditions. And without Medigap, there is no maximum limit to the deductibles and copays you might incur. Unless you have a lot of money, you are effectively trapped in your Medicare Advantage plan.

There are only four states – Connecticut, Maine, Massachusetts, and New York – whose insurance codes require companies to sell a Medigap to any applicant without regard to preexisting conditions. If you live anywhere else, you could be stuck.

Why do seniors choose Medicare Advantage?

The most common reason for choosing Medicare Advantage is the cost. It’s estimated that in 2024 more than 70 percent of Medicare Advantage enrollees are in plans with prescription drug coverage that charge no monthly premium. (Note that all Medicare enrollees must pay a monthly Part B premium of $174.70.) 

In comparison and depending on where you live, the average premium for a Medigap plan G, the one with the most comprehensive coverage for someone just turning 65, is around $150 per month. The average premium for a prescription drug plan is about $34 per month. That’s money someone in Medicare Advantage does not have to shell out.

Another big reason that people choose Medicare Advantage is the extra benefits. These plans receive additional money from Medicare that they are allowed to use to provide free extra benefits that Original Medicare is not allowed to cover. Those include routine dental and vision care, hearing aids, gym memberships, and over-the-counter medications. The extra benefits are often limited and come with prior authorization requirements, but too many people don’t look past the word “free.”

The other major reason is convenience. It’s one-stop shopping. Medicare Advantage enrollees don’t have to search for, analyze, and enroll in a prescription drug plan. They also don’t need to find and sign up for a Medigap plan.

Finally, some join Medicare Advantage because it’s the forced choice from their employer’s retiree plan. A growing percentage of those plans push their retirees into Medicare Advantage because of the cost and administrative savings.

What are the trade-offs?

Medicare Advantage’s use of prior authorization to approve or deny care is an important trade-off to think about. You’re not subject to prior authorization in Original Medicare.

Another significant downside to Medicare Advantage is network restrictions. The Medicare Advantage plans with prescription drug benefits require you to get all your care from providers in their network. If you want to see a specialist outside the network, you won’t be covered. Depending on where you live, that network, including the hospitals you have access to, could be limited.

In fact, some hospitals and medical groups have stopped accepting Medicare Advantage plans. Those include the Mayo Clinic facilities in Florida and Arizona, which are no longer in-network for any Medicare Advantage plan.

Two large medical groups with San Diego-based Scripps Health, totaling about 1,000 doctors and providers, stopped taking any Medicare Advantage plans this year, forcing about 30,000 patients to switch to Original Medicare or to find new doctors. MedPage Today, a health industry publication, quoted the Scripps CEO as saying,

We are a patient care organization and not a patient denial organization and, in many ways, the model of managed care has always been about denying or delaying care – at least economically. That is why denials, [prior] authorizations and administrative processes have become a very big issue for physicians and hospitals …

Another trade-off that many enrollees don’t think about ahead of time concerns domestic travel. ( See: Will Medicare cover you on a trip?) What if you get sick while vacationing in another part of the U.S.? With Original Medicare, you can see any doctor or provider who accepts Medicare, and your coverage is good anywhere in the United States. With Medicare Advantage, you may not be covered. Medicare Advantage has network restrictions. Unless it’s an emergency, if you’re out of network, you’ll likely pay out of pocket.

Questions to ask yourself

Which to choose: Original Medicare or Medicare Advantage? It ultimately comes down to your individual situation and personal preferences. Ask yourself the following questions:

  • Do I have, or is there a family history of, medical issues that might require specialized care?
  • How will I feel about needing prior authorization to see a specialist or for certain procedures?
  • How important is it to me to have a wide choice of healthcare providers?
  • How tight will my monthly budget be in retirement?
  • How important is the convenience of one-stop shopping?
  • Are the free benefits truly important to me?
  • Is my employer’s retirement plan a factor to consider?
  • Do I plan to do much traveling around the USA?
  • How much do I trust insurance companies to look out for my interests?

As I said at the beginning, you’re at that proverbial fork in the road. Your decision will affect how you get your healthcare, possibly for the rest of your life. Give it careful thought and read my Medicare 101 guide to help you make an informed decision. (Abe Wischnia, Special Features Columnist, Consumer Rescue)

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Abe Wischnia

Abe Wischnia is a special features columnist at Consumer Rescue, focusing heavily on the Medicare system. His goal is to help seniors navigate the complex rules, coverage issues, plans, and premiums while also helping his readers steer clear of scams and fraud. Abe started his career as a television news reporter and newscaster. He later transitioned to roles as a senior public relations and investor relations executive for companies in technology and biotech. With degrees in journalism and an MBA, Abe has written for newspapers, television news and documentaries, magazines, and corporate publications.