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As Medicare Advantage, the private version of traditional Medicare, takes over insurance for more than half the Medicare-eligible population, it’s worth noting that a number of changes have taken place since the program began as Medicare + Choice in 1997.

In this privately run program parallel to traditional Medicare, the for-profit insurance companies agree to insure a certain number of people, and the government pays a set amount per person (called “capitated” care) that is risk-adjusted to cover the supposed needs of the beneficiaries. This was intended to result in better care and lower spending, because of course private companies would do better than government at supplying care, right?

Some of that turned out to be true and some didn’t. And there are other changes in Medicare Advantage, including:

  • Medicare Advantage enrollment is increasing at a faster rate among communities of color, non-native speakers of English, less educated people and people of lower socioeconomic status than among wealthier, white people, research chows.
  • Black and Hispanic beneficiaries are enrolled in lower-quality plans.
  • The idea of incentivizing better quality of care and lower spending has not fulfilled its promise: The Medicare Advantage program costs more for the federal Government than traditional Medicare does.
  • While for many beneficiaries, the out-of-pocket costs of Medicare Advantage may be cheaper, for people with more health needs, traditional Medicare generally provides more care with fewer restrictions — because the M.A. plans often depend on a narrower network and have prior authorization limits. But under traditional Medicare, your payments for care may be more unless you pay for a Medigap policy.
  • Denials of care are more frequent for people of lower income, according to a recent report that focused more on Medicaid (for lower income people) but has implications for Medicare as well. State and federal officials have a role in denials, the report said.
  • Medicare Advantage populations tend to have fewer health issues, and people who develop health issues after a stint on Medicare Advantage and seek to transfer to traditional Medicare with a Medigap supplemental plan may find obstacles, higher premiums or complete denials for Medigap coverage.
  • Medicare Advantage insurers have repeatedly been accused of, and settled claims in cases for, exaggerating the health needs of their insured people in order to boost their payments from the government.

Demographics of Medicare Advantage

Medicare Advantage is growing quickly, but more quickly among non-white communities, a team of Brown University researchers found.

“First, from 2009 to 2018 the largest increases in MA enrollment were concentrated among enrollees who were Black, were dual enrollees, and resided in areas with the highest level (that is, in the highest quintile) of neighborhood disadvantage,” David J. Meyers, Vincent Mor, Momotazur Rahman, and Amal N. Trivedi from Brown wrote in a paper in Health Affairs in 2021. “Second, enrollees from racial/ethnic minority groups appear to have been heavily concentrated in specific plans, whereas White enrollees were more broadly distributed. Third, Hispanic enrollees tended to select plans with lower premiums. Finally, enrollees from racial/ethnic minority groups, overall, tended to enroll in lower-quality plans.”

“There is a growing body of literature indicating that marginalized M.A. enrollees may face substantial disparities in outcomes.Thus, M.A. plans may need to become a key partner in finding effective ways to address those disparities. Specifically, the fact that Black and Hispanic beneficiaries tended to be enrolled in lower-quality plans may need greater attention from policy makers. Although these trends may be in part a result of differences in the geographic availability of high-quality plans, that does not make them less concerning,” they wrote.

Meyers, an assistant professor in the Department of Health Services, Policy, and Practice at Brown, said by email and in a phone interview that other research reflects related trends.

“In a recent one, we find that M.A. enrollment is high among beneficiaries with limited English proficiency,” he wrote, sending this link.

“We also have other work that finds that star ratings in [Medicare Advantage] don’t necessarily reflect the outcomes of minority or low [socioeconomic status] beneficiaries, he wrote, sending this link. (https://jamanetwork.com/journals/jama-health-forum/fullarticle/2781100).

The conclusion: “Medicare Advantage star ratings, which are designed to reflect overall performance in a plan, are only modestly associated with quality for racial/ethnic minorities and enrollees of low SES in the same plan.”

Part of the significance rests on payment arrangements, they note: “Medicare Advantage (M.A.) plans, which disproportionately enroll racial/ethnic minorities and persons with socioeconomic disadvantage, receive bonus payments on the basis of overall performance on a 5-star rating scale. The association between plans’ overall quality and disparities in quality is not well understood.”

Restrictions on care: Denials and prior authorization

Medicare Advantage denials have been the subject of recent inquiries.

“A 79-year-old man with prostate cancer needed a PET scan, but his Medicare Advantage (MA) plan refused to pay for it,” Cheryl Clark writes over at MedPage Today. “Another M.A. plan denied approval for a wheelchair for a patient with multiple sclerosis and a tibia fracture. Still another enrollee recovering from a stroke found he was ineligible for coverage for physical therapy.

“The neurosurgeon treating a fourth patient, the late University of Connecticut physics professor and melanoma patient Gary Bent, PhD, referred him for acute rehab after removing a lesion from his brain. But Bent’s M.A. plan intermediary refused, putting him and his wife, Gloria, through a lengthy ordeal. They were told he ‘couldn’t withstand intense therapy,’ she said. He was eventually admitted to a skilled nursing facility, but was discharged from there after about 5 weeks because his M.A. plan discontinued payment, even though it turned out he had bacterial meningitis, she said.”

These were among the examples of coverage denials — despite their doctors’ orders and despite Medicare policy that they should be covered — presented in May during a hearing of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations.

“Lawmakers have collected many examples in which M.A. plans are failing beneficiaries, ‘denying or delaying care,’ said committee chair Sen. Richard Blumenthal (D-Conn.) at the start of the hearing. They ‘face denials in the middle of major medical crises, forcing them and their loved ones to fight even as they are fighting for their lives. Perhaps most troubling of all,’ Blumenthal continued, ‘there is growing evidence that insurance companies are relying on algorithms rather than doctors or other clinicians to make decisions to deny patient care.'”

The insurers defend themselves by saying that they reject treatments to avoid excess prescribing, improper care and overspending — as in Medicare fraud. This is a discussion that a lay person cannot actually adjudicate properly: When your doctor says “take this medication” and the insurer says “no, we won’t pay for that,” the patient is in an untenable position. What should you do?

This seems to be a good place for legislation and regulation to make sure that insurers are not harming people’s health and contravening doctor’s orders. To be sure, Medicare fraud exists, but it’s probably not my blood-pressure medication that is at fault.

But the programs are very popular

Also, there are a bewildering number of plans: In 2022, the average Medicare beneficiary could choose from 43 of those plans, more than double the average number available in 2018. They vary quite a bit, from what is included to the premium — which in many cases is $0, with several thousand dollars anticipated in out-of-pocket spending.

Many Medicare Advantage participants pay nothing in premiums or a small premium; “the average monthly plan premium for all Medicare Advantage plans, which includes Medicare Advantage-Prescription Drug plans, is projected to change from $17.86 in 2023 to $18.50 in 2024 (an increase of $0.64),” the Centers for Medicare and Medicaid Services wrote. M.A. participants often have an out-of-pocket spending cap, which varies from plan to plan.

Medicare Advantage plans may have a zero premium and include such bells and whistles as vision, dental and hearing coverage, and a gym membership or other things — though it is not clear how much coverage is actually delivered with those promises, Meyers said.

Despite narrow networks and restrictions, he said, “it is cheaper to enroll in a Medicare Advantage plan than it is to enroll in traditional Medicare. And they do offer benefits that many beneficiaries like, like dental and vision, though the quality of those benefits is kind of up in the air. But it’s kind of a trade-off that many beneficiaries make, that you take these restrictions, but you get these additional opportunities from it.”

“The most common supplemental benefits and Medicare Advantage are dental, vision and hearing aids,” he said. “But they are very narrow benefits. It’s actually a little bit challenging to see how much dental coverage you’re actually getting at the time of enrollment. There is some concern that some of these benefits are potentially more marketing than delivering value for for enrollees. But to be honest, there isn’t a whole lot of research and understanding that. It’s something that we have some ongoing work on.”

For traditional Medicare, Part A is free for most people because they paid in enough via payroll taxes; Part B and the Medigap supplemental (Part G or Part F, often), plus a Part D drug plan, can easily add up to several hundred dollars a month, though that often covers everything but a small deductible. For details, here’s our “How much does Medicare cost?” overview.

By the numbers: Who is where?

“More than 9 in 10 people with Medicare either had traditional Medicare coupled with some other type of coverage (48%), such as Medigap, employer coverage, and Medicaid, or were enrolled in Medicare Advantage plans (44%) in 2020,” the Kaiser Family Foundation wrote in a 2023 snapshot of sources of coverage among Medicare beneficiaries. “Nearly 1 in 10 Medicare beneficiaries (8%) – 4.6 million people – were covered under traditional Medicare but had no additional coverage.

“Among Medicare beneficiaries in traditional Medicare, most (86%) had some type of additional coverage in 2020, either through Medigap (36%), employer coverage (31%), Medicaid (17%), or another source (1%). But 1 in 7 (14%) Medicare beneficiaries in traditional Medicare had no additional coverage.”

The report adds: “Compared to all traditional Medicare beneficiaries in 2020, beneficiaries with Medigap were more likely to be White, have annual incomes of $40,000 or more per person, self-report excellent, very good, or good health, and have a bachelor’s degree or higher.”

Want Medicare enrollment by state, county and contract? Download here from cms.gov.

Leaving Medicare Advantage can be hard

People with more health needs tend to disenroll from Medicare Advantage and go into traditional Medicare at higher rates, Meyers said. This makes sense because if your M.A. plan is denying treatment, you might want to switch.

But for many people, the switch back is not easy. Only four states — Massachusetts, New York, Connecticut and Maine — provide some level of guarantee to enroll in a Medigap plan (usually Part G or Part F) to augment basic Medicare Part A and B benefits at a later time with pre-existing condition protection.

So if you’re not in one of those four states, and choose to switch out of Medicare Advantage and into traditional Medicare with a Medigap plan, that Medigap plan can and will use a health assessment to see if you have a pre-existing condition and charge more.

Beyond that, the Medigap plans can deny coverage if you are switching out of Medicare Advantage and you have a condition like ALS, alcohol or drug abuse, cirrhosis, immune disorders, kidney disease and a range of other conditions. Medigap coverage cannot be denied if you enroll immediately as you turn 65, or in a short period thereafter — but outside of that window, in states other than the four mentioned above, you can be denied or charged more. The Kaiser Family Foundation has a list of exceptions and state regulations.

Isn’t Medicare free for all?

There’s a widespread expectation that once you get to age 65, all your health costs will be covered. Not so, as a recent survey from The Commonwealth Fund found.

Titled “Medicare’s Affordability Problem: A Look at the Cost Burdens Faced by Older Enrollees,” the survey found that health costs are anything but free after 65.

“A common misconception is that once a person becomes eligible for Medicare, they no longer need to worry about medical bills or choosing a health plan,” it said. “For people choosing to enroll in traditional Medicare, most have supplemental coverage to help cover the cost-sharing payments and deductibles that are required.

“This supplemental coverage can be either a Medigap plan that they purchase, coverage from a union or former employer, or coverage from Medicaid. Some beneficiaries in traditional Medicare can’t afford to buy a Medigap plan or are restricted from purchasing one, don’t qualify for Medicaid, or don’t have access to employer or union-based coverage.”

Medicare Advantage costs the government more

“The federal government pays more per beneficiary in Medicare Advantage than they do per beneficiary in traditional Medicare, when you work it all out the end of the day,” Meyers said. “So we spend more money on Medicare Advantage than traditional Medicare. There is this sort of narrative that Medicare Advantage saves money. That could theoretically happen under a capitated model, but it hasn’t really happened in practice.”

Beyond that, insurers make a lot of money on these privatized programs — not just Medicare Advantage, but also managed care in Medicaid, the state-federal program for low-income people. They are a “cash cow” for the insurers, Wendell Potter, a former insurance company executive turned whistleblower, wrote recently on his Substack.

In the first half of 2023, the nation’s seven big health insurers collected $683 billion in revenues – largely through taxpayer-supported programs and the pharmacy supply chain, Potter wrote.

A year ago, he pointed out that for just one insurer, UnitedHealthCare, all of its “health plan enrollment growth over the past 10 years was in what it calls ‘community and senior,’ which means Medicare and Medicaid.”

“Health insurers’ massive profits from government-funded health programs will go down in history as the biggest heist, the biggest transfer of wealth from low- and middle-income American taxpayers to a few already rich corporate executives and shareholders,” he wrote.

Regardless of such concerns, including Congressional investigations, Meyers said Medicare Advantage plans are likely to experience continued growth.

Stricter regulation is also not likely — despite the fact that the insurers exploited the program to inflate profits by billions of dollars, as a New York Times investigation found. Eight of the 10 biggest M.A. insurers “representing more than two-thirds of the market — have submitted inflated bills, according to the federal audits. And four of the five largest players — UnitedHealth, Humana, Elevance and Kaiser — have faced federal lawsuits alleging that efforts to overdiagnose their customers crossed the line into fraud,” the investigation found.

So will there be any change?

“Even though I think more of the concerns with Medicare Advantage are coming to the forefront, I’m not sure how much appetite there is to change this trajectory,” Meyers said. “Plans have become very powerful lobbyists, and they are a very powerful influence in D.C. and Congress. Even though some of these issues are rising, I’m not sure it’s clear that there’s going to be any change in this trajectory. I think it’s very likely that plans are going to continue to grow, at least for a little while.”

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...