Yesterday, a reader named Fran left a comment asking about what happens to Medicare Advantage plans if/when health care reform is passed. (We're going to get a bit wonky now, but not too much.)
If you are unfamiliar with Medicare Advantage, they are essentially private Medicare, also referred to as Part C. In addition to the coverage available with traditional Medicare, some add coverage for dental and vision care, which traditional Medicare does not, and prescription drug coverage (Part D in traditional Medicare) is usually available. Even gym memberships may be covered. Elders who buy these plans pay one premium to the private insurance company.
With traditional Medicare, it is a bit more complicated. Part A, which is free, covers most hospital charges. Part B, which covers physician fees and many general medical needs, is optional although most elders purchase it. The premium, currently at $96.40 per month, is usually deducted from one's Social Security benefit.
Many people also purchase Medigap policies, supplemental insurance to cover the holes in original Medicare. And there is Part D, available from private insurers, for prescription drugs, a faulty system remedied to a degree with most health care reform bills that are on the table.
Anyone 65 and older probably knows all this. Here are some things you may not know about Medicare Advantage plans:
The federal government pays a subsidy to private insurers who offer Advantage plans, an amount that averages 14 percent per patient above what traditional Medicare pays. Since 2003, those extra payments (a giveaway) to private insurance companies are estimated to have cost $44 billion dollars and will increase over the coming years as more people join Advantage plans, especially when the oldest baby boomers become eligible for Medicare in 2011.
Even so, some services covered by traditional Medicare may not be covered by Medicare Advantage plans. Some plans exclude certain cancer drugs or mental health services or home health care expenses, or not cover them at all. And some services may be excluded from counting toward the annual out-of-pocket-expenses cap – if the plan has a cap; not all do.
One of the ways the several reform bills would cut health care costs is to reduce or eliminate the subsidies to private Medicare Advantage insurers. Reading the formulas will make your brain hurt so I'm not going to even try to explain them. The point is that the subsidies, as currently laid out in the reform bills and which President Obama has endorsed, will be reduced or cut and people like Fran with Advantage plans are worried about what that means to them.
Will insurers increase premiums? Will they cut services? No one knows. They, of course, cannot reduce services below what is available through traditional Medicare. So it appears to be a wait-and-see proposition.
Personally, I would like to see Medicare Advantage eliminated (it won't happen) for one big reason: there is no advantage except to increase profits to private insurers. In addition to those subsidies, to which all taxpayers contribute, Advantage plans remove 23 percent of the 45 million people now using Medicare from the traditional system reducing the risk pool and siphoning off premiums into the excessive salaries of insurance company executives.
So if health care reform passes with reductions or elimination of Advantage plan subsidies, some insurers may drop the coverage or increase premiums. But there is an easy remedy: join traditional Medicare.
And if you think your health care would suffer, re-read this Reflections column from Saul Friedman about his treatment for a stroke and esophageal cancer under traditional Medicare.
Another Bad Reform Idea New York Democratic Senator Chuck Schumer yesterday announced a twist in the public option debate: an “opt-out” plan. A public option would be included in a health care reform bill, but states would be allowed to opt out.
Oh, yeah, that would work – if you believe state politicians are any less in the pocket of insurance companies than U.S. Congress members. There is more on this at Huffington Post.