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Medicare News
Seniors in Poor Health May Pay More in Medicare
Advantage Plans
What is Medicare
achieving with billions paid to Advantage plans
May 19,2006 - Beneficiaries in poor health can pay
more out of pocket for care in Medicare Advantage (MA) managed care
plans than in traditional Medicare with Medigap supplemental coverage, a
new Commonwealth Fund report finds. The report says beneficiaries in
poor health can spend up to $2,195 more in annual out-of-pocket costs
for their care in 19 out of 88 plans than they would have in
fee-for-service Medicare with Medigap supplemental coverage.
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In "Medicare Beneficiary Out-of-Pocket Costs: Are
Medicare Advantage Plans a Better Deal?" Brian Biles and Lauren Hersch
Nicholas of George Washington University and the Fund's Stuart Guterman
compared estimated out-of-pocket costs for 88 MA and Medigap F plans in
44 areas across the nation.
They found costs for beneficiaries in good health
lower in all 88 MA plans and, for those in fair health, all but two MA
plans had lower costs than fee-for-service plans. But for beneficiaries
in poor health, 19 of the 88 plans had higher out-of-pocket costs than
they would have had in traditional Medicare with a Medigap supplement.
The authors conclude that "the benefit packages
offered by MA plans often result in substantial out-of-pocket costs for
beneficiaries in poor health."
In the MA plan with the least financial protection,
MA plan enrollees in poor health faced $7,522 in annual out-of-pocket
costs, compared with $5,606 in traditional Medicare with a Medigap F
plan, a difference of $1,916. In the MA plan with the best protection
for enrollees in poor health, annual out-of-pocket costs were $1,359 in
the MA plan compared with $5,984 in the traditional Medicare plus
Medigap Plan F coverage.
As a result of policies enacted as part of the
Medicare Modernization Act of 2003, Medicare paid MA plans an average of
$800 extra per enrollee in 2005, to let MA plans improve their benefit
package by lowering premiums and cost-sharing.
The new study shows that, despite those richer
benefits, many beneficiaries who are the highest users of health care
services may still be at a disadvantage.
"These findings raise questions about what Medicare
is achieving with extra payments to private Medicare Advantage plans,
which totaled more than $2.7 billion in 2005 over fee-for-service
costs," said Fund President Karen Davis.
"While the payments were designed to help improve
benefit packages, the most vulnerable enrollees in MA plans are facing
high cost burdens for their health care, leaving them at risk for not
getting needed health care services. The extra payments provided to MA
plans could be better targeted to protect the sickest beneficiaries."
The authors offer several ways to address the
current situation:
● Increase standardization of MA benefit packages
to both protect beneficiaries in poor health and simplify and clarify
the selection of plans for all Medicare beneficiaries.
● Conduct more research on risk adjustment and other mechanisms to
reduce the incentive for plans to avoid beneficiaries in poor health.
● Limit the vulnerability of MA plan enrollees to substantial
out-of-pocket costs by prohibiting excessive cost-sharing that creates a
financial burden on enrollees in poor health.
● Suspend the annual MA lock-in plan for beneficiaries, which began in
January 2006, until new protections are put in place.
The authors note that "if Medicare were to offer a
true alternative to private coverage--such as a more comprehensive
fee-for-service option--market forces could be expected to work more
effectively, and beneficiaries could choose between comparable
alternatives on an equal footing."
The Commonwealth Fund is a private foundation
supporting independent research on health and social issues.
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