By Jeffrey Belden, M.D.; Robert Blake, M.D.; Steve Calloway, R.Ph.; Linda Headrick, M.D.; David Mehr, M.D.; Bill Parks, M.D.; Margie Sable, Dr.P.H.; and Mahree Skala, M.A.
Columbia Missourian, November 6, 2023
An increasing number of Medicare beneficiaries are enrolled in heavily advertised Medicare Advantage plans. These plans, which interpose an insurance company middleman between the Medicare program and patients, are superficially attractive. They offer such benefits as coverage for some vision, hearing and dental services and gym memberships.
However, a recently published investigation has found that Medicare Advantage overcharges American taxpayers by a minimum of 22% or $88 billion a year with no clear evidence of better health outcomes.
Strategies used by Medicare Advantage to overcharge taxpayers include:
- Targeting healthy beneficiaries who generate less costs for the plans. Medicare Advantage plans receive capitated payments from Medicare. They are paid a certain amount per enrollee. Healthier enrollees generate less expense and thus allow insurance companies to retain more of the capitated payments as profit. This “favorable selection” is well documented.
- Limited networks. In contrast to traditional Medicare, Medicare Advantage plans frequently only cover health care provided by specified doctors and hospitals; thus, limiting patient choices.
- Patients who need health care when traveling may be forced to pay for it out of pocket.
- Prior authorization. With prior authorization, the insurance company must approve treatment before the company will pay for it. The company could refuse to pay for treatment that a physician has recommended, overruling a physician’s judgment. Far more frequently than traditional Medicare, Medicare Advantage plans require prior authorization of certain medications, surgical procedures and other forms of care. This can create serious obstacles to receiving essential medical care, frustrating patients, and potentially putting them at risk. A 2022 investigation of Medicare Advantage organizations by the Inspector General of the Department of Health and Human Services documented “widespread and persistent problems related to inappropriate denial of services.” One of the signers of this letter experienced adverse effects of a prior-authorization requirement of a Medicare Advantage plan.
- Because of these hassles — limited networks, prior authorization, and other practices that decrease access to necessary care— patients tend to switch from Medicare Advantage to traditional Medicare as they get sicker and need more medical care. Sicker patients generate higher costs and thus erode corporate profits. Downloading such patients to traditional Medicare benefits Medicare Advantage companies. In addition, patients who switch from Medicare Advantage to traditional Medicare may encounter obstacles.
- Upcoding of diagnoses. The capitation that Medicare Advantage plans receive from the government is affected by the severity of the medical problems enrollees have. While Medicare Advantage plans seek healthy enrollees, there is an incentive to make the enrollees appear to be sicker when seeking taxpayer money. The well-documented propensity for Medicare Advantage plans to amplify the illness severity of patients by manipulating diagnostic coding is clearly fraudulent.
- Underpayments to hospitals to boost profits. This has serious consequences for patients. USA Today reports that an increasing number of hospitals around the country are ending contracts with Medicare Advantage plans because of inadequate reimbursement for services provided. The CEO and president of Scripps Health describes Medicare Advantage strategy as “delay, deny or don’t pay” and concludes “They’re in the business of making money.” This trend further narrows choices available to patients and increases the danger that patients are stuck with huge medical bills.
A major appeal of Medicare Advantage plans is the added benefits provided. These benefits were a result of intense lobbying by insurance companies for an “advantage” of their feeding at the Medicare trough. However, these benefits should be included in traditional Medicare. The cost of adding them to traditional Medicare would be at least $4 billion less than the annual overcharges from Medicare Advantage. In other words, beneficiaries could receive dental, hearing and vision care through traditional Medicare at less taxpayer expense.
Taxpayers and Medicare recipients should look beyond the slick, heavy promotion of Medicare Advantage to see the serious negative consequences. Those enrolled in Medicare Advantage should raise these issues with their plan.
