Inside Medicare Avantage

EP# 66 FLATLINING Podcast Recap

This week, the FLATLINING Podcast team dissects Medicare Advantage plans, what they do for patients, what the payers get from them, and how they impact providers.

Medicare Advantage programs are extremely popular for several reasons. Ron explained that with a Medicare Advantage plan, enrollees may reduce their out-of-pocket expenses such as coinsurance, where patients may be responsible for 20% of the Medicare approved cost, and thats after you meet your deductible.

With Medicare Advantage plans, out-of-pocket costs vary, plans may have lower or higher out-of-pocket costs for certain services. You may also have an additional premium. The other attraction to Medicare Advantage is it will cover drugs, where with traditional Medicare the enrollee often needs to pay for a separate plan for drugs called Medicare Part D.  There are also vision and dental options. Many seniors who are on a fixed income often like the idea that they won’t be on the hook for additional costs if they need the care, is a primary reason these plans are extremely popular Ron said.

Matthew points out that if Medicare Advantage provides more benefits to seniors who purchase these plans, questions if the plans save the federal government money.  Ron says that’s hard to nail down, because of the variations in who had what care etc. The insurance companies claim the programs do save the government money, but Ron explains that you can’t point to something definitive to say that that they are right.

With the popularity of Medicare Advantage seeing enrollment numbers of 33.8 million, which is over half the eligible population for traditional Medicare, Matthew asks Ron why those in favor of a universal coverage programs are not big fans of Medicare Advantage? Ron points out that it’s not the coverage of the enrollees that bothers those who like universal coverage, it’s the idea that insurance companies are profiting from what the government is already providing. They say the gaps in coverage could be plugged through other means rather than relying on the insurance industry who is profiting from it. Ron points out that if the insurance companies did not make money on Medicare Advantage plans, they would not offer them.   

One way to see what the profits to insurance companies might be, Ron said, was looking at what is called the “gross margin”. This is the amount of money paid out for medical care for each patient by the insurance company, but before all the administrative costs are subtracted. Ron quotes a Kaiser Foundation study that says the average gross margin for employer group insurance, individual plans and managed Medicaid markets is about $700 dollars per patient, for the Medicare Advantage the gross margin is around $1700 per patient.

Matt and Ron discussed some of the new marketing marriages with Medicare Advantage and grocery store chains and even grocery delivery companies. Ron points out that seniors are extremely loyal to certain brands, and with the payers having access to a large pool of potential customers, it creates an opportunity for these retail entities to market to this population segment through the Medicare Advantage plan and it helps the insurance companies sell their plans as well.  

Recently a story out of San Diego brought to light Scripps Health’s decision to not participate in Medicare Advantage plans. Ron unpacks what is going on by explaining that Medicare Advantage agreements can be what is called a risk-transfer agreement, where providers take on a certain level of risk for enrollees, and this can lead to providers finding themselves underwater.  According to Ron, the other frustrations with Medicare Advantage are typical with any provider-payer relationship, things like obtaining prior-approvals, delay in reimbursements, and denials of care. These actions increase expenses to providers through increased administrative demands and delaying care to patients.  

If enrollees can’t use their Medicare Advantage plan with their local provider, they may be able to go out of network, but Ron points out that enrollees need to read their plan carefully and contract their administrator to get the details. He points out that many providers that are now dropping Medicare Advantage, would likely prefer patients to drop their Medicare Advantage plans and go back to straight Medicare, it may not pay well he said, but it is simpler.