By James Fieseher, M.D.
New Hampshire Union Leader, Sept. 24, 2024
September starts the open enrollment period for seniors choosing a health care plan, either traditional Medicare (TM) or any one of a number of commercial “Medicare Advantage” plans. Picking the one plan that is right for you depends upon your overall health status, your financial situation, and your ability to predict your health in the future.
For the next three or four months, you’re going to be flooded with advertisements for various Medicare Advantage plans, pitched by older celebrities. You’ll hear them say the word “free” a lot, and if you think commercial health care is being offered for free, there’s a famous bridge in Brooklyn you might be interested in buying.
Congress established Medicare in 1965 to provide a highly transparent, cost-effective way to publicly fund the health care needs of seniors. It came with a set of clear guidelines for doctors and patients letting them know which services would be paid and which were not. Then, 98% of taxpayers’ dollars through Social Security went directly back to medical costs for seniors while roughly 2% went to administrative fees. Once the doctor and patient agreed on the medical services needed, those costs were promptly paid. That same formula is still in effect today, 59 years later, although the administrative costs are now closer to 3%.
By contrast, Medicare Advantage plans started in the 1970s and came into their own in 2004, when commercial insurers started aggressive advertising. They boasted “free” everything as well as dental and eye coverage — “depending upon your zip code.” Clearly, their health care isn’t free, they bill the Medicare Trust Fund directly, with a built-in 10% profit margin for administrative services.
Commercial health insurers found loopholes in the way Medicare Advantage (a.k.a. Medicare Part C) was structured enabling them to increase profit margins at least threefold. One of these was that medical insurers would self-regulate, so little chance that outright fraud would be detected. Last year alone, commercial insurers overcharged CMS (the Center for Medicare and Medicaid Services) an estimated $88 billion. But because of a lack of transparency, that number could be as high as $140 billion.
What does that mean to you when deciding on a plan?
One of the ways commercial Medicare Advantage insurers can extract more money from the Medicare Trust Fund is through a process known as “upcoding.” This is a way of taking a past or present medical condition and redefining it as a more serious problem than your medical practitioner originally listed. Suddenly elevated blood pressure is redefined as a serious blood pressure problem, or pre-diabetes becomes uncontrolled diabetes. This enables the private insurer to bill CMS at a higher rate.
Commercial insurers have the right to “manage” your health care having a say whether or not they will pay for a medication or procedure that you and your doctor have decided is necessary through “prior authorization.” Waiting for a for-profit insurer to approve treatment has caused serious delays or outright denials of urgently needed care, often resulting in patients paying the entire cost out of pocket, saving the insurer millions.
Because of upcoding, Medicare Advantage patients appear to have more serious health problems than patients on traditional Medicare, while at the same time those same patients receive fewer medications and procedures due to prior authorization denials. Advantage plans may save money in the up-front costs and added benefits such as hearing and dental, but you’ll lose your shirt and a lot more if you develop more than a minor medical condition.
In many ways, Medicare plans resemble the bond market. Traditional Medicare, managed by the U.S. government is like treasury notes, they’re AAA rated, a guaranteed safe investment. Medicare Part C “Advantage” plans are like C rated bonds (a.k.a. “junk bonds”), they entice with higher yield offerings, but the pay-off is risky.
If you’re on a Medicare Advantage plan and want to switch back to traditional Medicare, you might not be able to, or it might cost you a higher rate depending upon your health and the number of years you’ve been on an Advantage plan. There are commercial plans that cover “gaps” in traditional Medicare, such as hearing, dental, and eye care. These can be covered at fairly low cost through supplemental plans known as “Medigap” plans. But if you have a pre-existing condition, especially if it’s serious, you might be ineligible or have to pay a much higher rate for any of the Medigap coverage plans. Plus, switching is intentionally difficult, even if you don’t have a pre-existing condition.
If you think you’ll never need any serious hospitalization or surgery for the rest of your life, an Advantage plan might be right for you. For the rest of us, I would suggest sticking to the tried-and-true; traditional Medicare will save you lots of money in the long run and will avoid the frustrating delays in care.
Dr. James Fieseher is a retired physician and member of Granite State Physicians for a National Health Program.
