Hate may be too strong a word, but health experts certainly do not love private Medicare Advantage (MA) insurance plans. There is ample research that MA plans soak the government by gaming its reimbursement rules to unfairly boost their payments. Other studies have found that the plans’ rules requiring prior authorization of care – part of their mandate to minimize unneeded, expensive care – too often have delayed and denied care to people who need it. Marketing efforts to sell MA plans also are faulted as overly aggressive and misleading.
Consumers, however, have not been dissuaded by this steady drumbeat of negative press coverage. They love MA plans, which now cover more than half of all Medicare users. The plans can be far cheaper than traditional Medicare, and cover dental, hearing, and vision care – things traditional Medicare is not permitted to cover.
The Centers for Medicare & Medicaid Services (CMS) has staunchly supported MA plans, which have been around in their current form for about 20 years. Traditional Medicare can provide terrific health coverage. But it has few controls on the amount of care people can receive and has been a big contributor to runaway health spending that is not sustainable. The kind of value-based, managed care promised by MA plans offered the promise of a better approach. The agency recently has responded to negative research and media coverage by toughening oversight of MA revenues and operations.
Against this backdrop, the Journal of the American Medical Association (JAMA) recently asked experts to write two papers making the case against and for MA plans. Some media accounts incorrectly portrayed the papers as new research. They do not break new ground but, instead, base their opposing views on existing research. The fact that experts can look at the same body of facts and come to sharply different conclusions helps explain why the best path forward for Medicare is so hard to chart.
These articles are not available to non-subscribers, so I am quoting from them extensively, with thanks and appreciation to JAMA.
The Case Against MA
Physicians Adam Gaffney, Stephanie Woolhander, and David U. Himmelstein wrote “Less Care at Higher Cost - The Medicare Advantage Paradox.” They are academics at Harvard and Hunter College.
Two insurer strategies drive MA overpayments: diagnosis upcoding and avoiding enrollees who are ill and do not contribute to profits. The Centers for Medicare & Medicaid Services (CMS) pays MA plans using a complex risk-adjustment formula incorporating the diagnoses plans report. Hence, insurers can boost revenues by inflating the number and severity of each enrollee’s diagnoses.
Although some experts held out hope that refinements to risk adjustments instituted in 2007 largely eliminated such gaming, a June 2023 MedPAC [Medicare Payment Advisory Commission] analysis confirmed that MA insurers have been soundly beating CMS in the cat-and-mouse game over cherry-picking.
Prior authorization requirements, which are rare in FFS Medicare, serve 2 functions: constraining the use of expensive care and hassling patients (and their physicians) who most need it.
Whatever the mechanisms that MA plans use to implement favorable selection, they generate large overpayments, which, according to MedPAC, are “separate” from and “additive” to the overpayments due to upcoding. Together, upcoding and favorable selection created MA overpayments of 23%.
Paradoxically, despite those overpayments, MA plans spend 9% less on medical services than FFS Medicare spends for comparable enrollees. Most MA plans offer helpful supplementary benefits, for example, eyeglasses, some dental coverage, and reduced Part D (and occasionally Part B) premiums and out-of-pocket costs. But their savings from managed-care techniques, including network restrictions, prior authorization requirements, and financial incentives for health care centers and clinicians to curtail expensive care, more than offset MA plans’ extra spending for supplementary benefits.
If MA plans pay for less care, where do the overpayments go? Some pay for supplementary benefits, although plans do not disclose how much they spend on them, and MA enrollees do not get significantly more dental care or incur lower out-of-pocket dental costs than those in FFS Medicare. Instead, overhead and profit eats up the lion’s share.
Only 2% of FFS Medicare [fee-for-services, traditional Medicare] expenditures go for overhead. But MA insurers incur extra expenses for television advertisements, health care network management, benefit design, executive salaries, health care utilization review, prior authorization, and shareholder profits, driving their overhead up to 14% (just below the limit set by the Affordable Care Act) according to a report from Milliman [based] on financial results for 2022.
Could MA be reformed to make it a better deal for taxpayers? The failure of past efforts to rein in MA gaming and overpayment does not bode well for incremental reforms like tweaking the payment formula. Moreover, payment reductions would not curtail administrative waste or administrative burdens on physicians, or ease access for patients.
We think the time has come to declare MA a failed experiment and abolish it. . .. We must eliminate MA and double down on traditional Medicare, covering all enrollees in an expanded and improved Medicare program. That would be a good deal for patients and taxpayers.
The Case for MA
Dr. Sachin H. Jain wrote “The Case for Continuing to Improve Medicare Advantage.” He is president and CEO of SCAN, a large nonprofit health insurer.
Unfortunately, the Medicare program . . . exposes beneficiaries to high costs that many cannot afford. Medicare requires significant out-of-pocket outlays including a $1500 deductible for inpatient care (in addition to coinsurance for long inpatient stays); a monthly means-tested part B premium for physician services that can range from $0 to $594/month; [Most people pay $174.70 a month.] 20% coinsurance for part B outpatient services; and 20% coinsurance for part B drugs.
To avoid these considerable out-of-pocket costs, many people purchase supplemental policies at an additional cost of several hundreds of dollars per month. All told, Medicare beneficiaries can easily find themselves exposed to costs of $1,000 per month per beneficiary to achieve some degree of full coverage (above and beyond what they paid in annual Medicare taxes their entire lives).
It is little wonder, then, that Medicare Advantage plans . . . have become as popular as they have. Although Gaffney et al argue . . . that MA is a “a failed experiment,” they never consider the notion that traditional Medicare is, in fact, the failure. A growing number of beneficiaries choose MA plans because they fulfill the original vision of Medicare itself: they give them access to quality health care, ensure predictability with regard to health care costs, and offer a wide array of health-improving benefits.
With the growing recognition that social context affects health outcomes, many Medicare Advantage plans also provide transportation, meal, and fitness memberships - services beneficiaries would otherwise have to fund on their own. All Medicare Advantage plans include a transparently stated maximum out-of-pocket limit (MOOP) above and beyond which plans provide full coverage of costs.
The argument . . . that the quality of Medicare Advantage is inferior, is unsupported by notable recent analyses and reviews that demonstrate better performance on several key outcomes.
Although traditional Medicare will always be the choice of some beneficiaries, our focus should be on constructive proposals to improve Medicare Advantage through continued refinement and more sophisticated oversight—not dismantling it altogether. Well-intentioned analysts . . . seem to have misplaced nostalgia for the traditional Medicare program. If only most beneficiaries - objectively poorly served by the glaring inadequacies of traditional Medicare - felt the same way.
Philip Moeller is the principal author of Simon & Schuster’s Get What’s Yours series of books about Social Security, Medicare, and health care. A new edition of his Medicare book will be published October 8. Substack.
Thanks for the article! Based on your summary, i am not persuaded by Dr Jain’s argument but mainly because he does not address and rebut the points made by the anti-MA piece - at least not in your summary. more reading to come.
I suspect that MA plans are popular for two reasons: (1) Advertising; (2) "I'm all right, Jack": when I seem okay, it's easy to assume I'll stay that way. This is the same fallacy that sideswipes so many people who presume they will be able to retire way off in the future, with plenty of time to save before that point--and then get sidelined earlier and have to figure out how to cope.
I've no objection to private enterprise as an alternative to government programs. Only one of my own volunteer activities is with a government entity; the others are with non-profits. But what kind of alternative?
When MA programs advertise their benefits, and CMS does not offer similar marketing to tout its program's advantages, naturally we get a distorted view. If MA plans provided services as good as or better than traditional medicare, they deserve the profits. But when their overhead is higher and also their services are worse, their gaming the system sounds scam-like, I have to ask what public good they serve. Their existence does not seem to improve the procedures of traditional medicare. What's left? Happy lobbyists are not a public good. Their profits come far more out of tax dollars than out of member premiums, unless I'm much mistaken. Why should our taxes support them, partly by subsidy and partly by allowing them to cherry-pick the healthier enrollees, leaving sicker ones to default to traditional medicare based om premiums? This doesn't even count the public harm, or call it the human cost, that results from delayed care and under-care. It may wear the appearance of avoiding overtreatment, but in practice the incentive commonly is simply in favor of delay.