10/22/2024
Choosing a Medicare Plan: A Doctor’s Perspective
John House, MD
Health First Clinic
It’s that time of year again when millions of patients across the country are deciding which insurance plan to choose for the upcoming year. For those 65 and older, as well as those on disability, the choice is whether to choose “regular” Medicare or a Medicare Advantage plan.
I frequently get asked my opinion on that choice, and even though I am not an expert on insurance, as a healthcare professional and a tax payer, I do have some insight which may be helpful.
Regular Medicare is divided into multiple parts: Part A covers hospitalization. Part B covers outpatient care. Part D covers medications. There are some variables, but in general Medicare part A and B cover 80% of health care costs. The patient pays the other 20%. A visit to a doctor’s office usually doesn’t cost the patient much, but it’s easy to see that a hospital stay, even a short one, can lead to bankruptcy, particularly for those living on a fixed income.
To address that potential financial burden, private companies began to offer so-called supplemental plans. For a monthly fee, a patient can buy private insurance to cover the 20% that Medicare doesn’t cover. Usually that monthly fee isn’t very large and, most of the time, patient’s don’t have a co-pay or deductible. For low-income patients, Medicaid can act as a supplemental.
In 1997, congress passed a law allowing the creation of what today are called Medicare Advantage (MA) plans. MA plans are offered by private insurers and replace a patient’s regular Medicare. Instead of paying hospitals and doctors individually, Medicare pays the private insurers fixed monthly rates to provide this service.
The primary attraction of MA plans to patients was that, historically, MA plans covered 100% of healthcare costs with no out-of-pocket expense for the patient. Given the out-of-pocket costs of regular Medicare, MA plans caught on like wildfire with more than 50% of Medicare patients having opted for one of the various MA plans in 2023.
Medicare Advantage plans are offered by for-profit companies with brands such as Aetna, Cigna, Humana, United Healthcare, BlueCross, and others. It’s important to note that despite their claims of being concerned about patients’ health, these companies exist to make money for their shareholders. Period.
I stress the profit motive for MA plan companies because that has a direct impact on patients and on the overall healthcare system.
In 2023, the top six companies that offered MA plans generated almost $1.4 trillion in revenue. According to KFF, that same year, MA plans generated almost $2,000 in profit for each Medicare enrollee, twice the profit generated by those on non-Medicare policies. 100% of that profit came from Medicare tax dollars. In other words, that profit came out of the money that was deducted from your paycheck for all those years for the sole purpose of providing healthcare to you in your retirement years.
The amount that Medicare pays the companies that offer MA plans is fixed each year and is based on a variety of factors including the health complexity of a given patient. Given that fixed amount of income, those for-profit companies, all of which strive to increase their profits year-over-year, have two main ways to improve their bottom lines: reduce medical services that they pay for and/or cut what they pay to those who provide healthcare services.
This past year, MA companies have come up with another way to improve their profits: they no longer cover 100% of costs. In other words, patients have a co-pay and often have a deductible. That’s starting to sound like regular Medicare.
Their efforts to increase profits have multiple negative effects on patients’ health and on the overall health of the healthcare system: patients pay more for the services they receive, needed tests and procedures are denied with greater frequency, and fewer providers are willing to accept MA plans. This past year there were multiple headlines nationally about large healthcare systems that stopped accepting various MA plans due to poor reimbursement by those plans.
The reality is that the US spends more money per person on healthcare than any other country and yet has the worst health outcomes of any developed country. In my professional opinion, this is due at least in part to the commercialization of US health care.
The Medicare Advantage idea was conceived by large insurers as a way to get the lion’s share of the huge amounts of money spent by Medicare - corporate welfare, if you will. And it has worked. Every year headlines warn that Medicare is running out of money. When you consider the billions of dollars in profits that are going to private insurance companies simply to provide the same services that Medicare has been offering, you have to question why our politicians allow the programs to exist at all.
It should be clear by now that I recommend regular Medicare with a supplemental. Dollar for dollar, you will be better off financially and you will have a better healthcare experience. Choosing a Medicare plan can be very complicated and can have long-lasting effects, so please consult with an insurance professional before you make your decision.
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