July 15, 2008
The Trouble With Medicare Advantage
by Maggie Mahar
Everyone understands why Congress was so reluctant to cut physicians’ fees. Reimbursements for primary care physicians are very low—so low that 30 percent of Medicare recipients who are looking for a new medical home can’t find one. Cut fees, and fewer doctors will take Medicare patients. The AMA, seniors and the AARP are all up-in-arms. Few politicians like to disappoint this trio.
But why are so many Congressmen willing to cut Medicare Advantage? After all, one out of five seniors is in the program: Won’t they be upset?
The truth is that, as many seniors have discovered, Medicare Advantage fee-for-service (the plan Congress has now voted to phase out by 2011) is not turning out to be an advantage for them.
Here is what David Fillman, an International Vice President of the American Federation of State, County and Municipal Employees (AFSCME), which represents some 1.4 million workers, had to say about MA’s fee-for-service insurance when he testified before Congress in January:
“Insurance companies have targeted our employers for the hard sell, including offers to pass through some of the federal subsidies to state and local governments.”
Fillman rightly calls the subsidies a “windfall” –Medicare pays fee-for-service Medicare Advantage 17 percent more than Medicare would spend if it delivered the services itself.
Public Employees Forced into Medicare Advantage
Fillman goes on to explain: “The new accounting rules issued by the Governmental Accounting Standards Board (GASB) place a tremendous strain on public retiree health benefits and add to the lure of these private Medicare plans. The GASB rules require public employers to estimate future costs of their retiree health benefits – 35 years into the future – and publish them on their annual financial statements. To reduce this paper liability, more public employers are proposing a switch from their own solid retiree health plans, which include traditional Medicare, to these private Medicare plans. This is a major factor in public employers’ decisions to switch to Medicare Advantage private fee-for-service plans.
“In my state [Pennsylvania] Governor Rendell plans to replace our Retired Employees Health Program (REHP) for state government retirees with a Medicare Advantage private-fee-for-service plan and proposes to cut our prescription drug benefits,” Fillman explained. “He is removing retirees who are aged 65 and older from the secure state plan and forcing them out of the traditional Medicare program. By removing retirees from the secure state public plan (REHP), the Governor is denying them their right to access the secure Medicare program they have paid into all their lives.
“Our retirees are moving from the Medicare defined benefit plan with a solid wrap-around supplemental, to an unknown plan. Although these private Medicare replacement plans must be the actuarial equivalent of Medicare they have a broad hand in shaping the details and setting co-payments, premiums and the real value of benefits from year to year.” In other words, the plans are complicated, and the plan you sign up for this year may not cover the same benefits next year. As Fillman puts it, “Experts have joked that if you have seen one Medicare Advantage fee-for-service plan then you’ve seen one MA plan – for that year.
“Aside from the confusion and added complexity, the forced shift to a Medicare replacement product can obscure a reduction in benefits and a shift of costs onto beneficiaries who have limited incomes and may be in fragile health.”
Advantage supporters like U.S. Senator Tom Coburn, like to argue that Advantage fee-for-service offers Choice : “Medicare Advantage offers seniors personal choice and control over their health care decisions” But if benefits aren’t transparent, how can seniors make a real choice?
“We oppose this forced switch both from our understanding of its impact on Medicare generally as well as our fellow AFSCME members’ experiences in West Virginia. Those retirees were forced out of Medicare and into an MA private fee-for-service plan last July,” Fillman observed. “We also are beginning to hear from AFSCME retirees in Ohio who were just switched over this month to a Medicare Advantage private fee-for-service plan.
“In West Virginia, 37,000 retired state employees and teachers covered by the Public Employees Insurance Agency (PEIA) were forced out of traditional Medicare and stripped of their supplemental plan. They were enrolled in Advantra Freedom, an MA plan administered by the for-profit giant, Coventry Health Care. In November, in PEIA hearings, hundreds of angry West Virginian retirees testified against Advantra Freedom.”
Seniors Tell Their Stories
One senior at the Charleston hearing, Peggy Beavers, complained that Coventry is “known throughout the country to cut costs any way they can”, and said she did not understand why she would be forced out of Medicare into a replacement product offered by “a company that’s all about making a profit for itself.”
“Specifically,” Filllman testified, “AFSCME is concerned about the following complaints we have received from West Virginia and other states regarding PFFS plans. These concerns are typical of the problems inherent to MA private-fee-for service plans.
Even though these plans are marketed as nationwide and have no networks – this is false. They limit access to care and choice because significant numbers of doctors and hospitals have refused to accept the card, especially out-of-state. For example, many West Virginia retirees who moved out of state could get no doctor to accept the private MA plan.
MA private fee-for-service plans may offer additional benefits, such as gym memberships (the only major additional benefit in West Virginia), or hearing aids and eyeglass coverage, but they modify their benefits to cut corners in more important areas, such as limiting hospital days or charging higher co-pays for nursing homes than Medicare. Indeed, officials in West Virginia actually told a state legislative committee in November that “we know that … retirees who use more medical care will be worse off under this plan”.
PFFS plans more frequently deny claims in order to hold down costs.
The appeals processes are more difficult under the private plans. Retirees are no longer enrolled in traditional Medicare and must go through the company rather than Medicare’s transparent appeals process. Further, beneficiaries are often bounced between CMS and the insurance company seeking redress.
The subsidy to the private plans causes government employers, many of whom have secure, self-insured medical plans, to switch control of their medical decisions to these private companies, break up their efficient risk pools, and allow private companies to profit off our retirees.
The plans are not stable. They can and do pull out of markets, disrupting health care services and causing much anxiety among beneficiaries.
“There is a lack of quality and accountability. These private replacements for Medicare are exempt from basic quality reporting requirements.
“In addition, “ Fillman concluded, “we are concerned that Medicare Advantage plans are a drain on our state and its retirees. The more than one million Pennsylvania seniors who are enrolled in traditional Medicare are paying about $25 million in extra premiums to subsidize the 32 percent of beneficiaries who are enrolled in Medicare Advantage plans. The State is also paying for these subsidies. The Medicaid program in Pennsylvania pays Part B premiums for low-income beneficiaries and this cost was an extra $6.3 million in FY 2007.
“When Congress opened up Medicare to private plans, it was based on the claim that the health insurance industry would be more efficient, provide more care coordination, and do so at less cost to taxpayers. PFFS plans do none of the above, and enrollees who are forced into them are no longer enrolled in Medicare.
“Again, the root of these problems is the excessive financial incentives to develop and market these products which are designed to replace the tried and true Medicare program. These problems, the trend towards private plans, and the devastating privatization of our traditional Medicare program must be addressed. We concur with the recommendations made by the Medicare Payment Advisory Commission (MedPAC ) that MA private plans should compete with traditional Medicare on a level payment playing field.”
The Trouble WIth Medicare Advantage
July 15, 2008