No wonder Medicare is going broke

I don’t think we have any disagreement on Medicare. Saving money is always an interesting concept when it comes to government programs but not the topic for here. The government has saved me so much money that I don’t where to put all the money but they raised interest rates for me to help.

I can say with little doubt that my Medicare Supplement plan is the best medical plan I have ever had and I have experienced quite a few between my wife and I. Advantage plans are like many of the private plans I used to have whereas Supplement plan is like the best private medical insurance I ever had. Is it “best” for the money? That becomes a different question of what best means and what is the value of money to each person. The same value judgement was made by the companies I worked for, the plans they selected, and what they charged the employee for insurance (ownership changes were the catalyst for most of my insurance changes).

I live in MN and there are some pretty great PPO Advantage plans here (not free plans) and they will include all majors medical groups including the U of MN and Mayo Clinic. They are cheaper than the full boat supplement plan that I have and will include some other services. I would not hesitate to get one if I could not “afford” my supplement plan, Part D and Dental. I have looked at medical insurance around the U.S. in my retirement and I am amazed at the differences, good and bad so I share your observation.

The plan argument is a little like recommending the best car and Lexus and BMW top the list. If you say, best for the money, everyone should drive a Toyota Corolla. If you say everyone will drive a Corolla or provide a compelling government discount so it is advantageous to own a Collova, things are going in the wrong direction IMHO.

This time of year there are all sorts of commentaries about choosing Medicare plans, pro and con. There are also articles about Advantage plans denying hospital claims and taking investigative reporters to break the logjam with insurers (major players I might add). It will all play out someday and the best insurance will not be a Medicare option. Until that happens, I pay more for the best. My wife likes it too so I am trapped now.

You guys are making great points and show what I suggest everyone do……perform significant and objective research before making a coverage decision. Well done. Here is what I think are some interesting financial and economic aspects of the Medicare situation.

If one is not eligible for social security they can still enroll in Medicare at age 65 by paying the appropriate premiums. The Part A premium is $505.00 per month, the Part B is $174.70 per month and assume a Part D premium of the Medicare average of $34.70. Further assume a Medicare Supplement G plan at $165.00 per month. Thus that person would be paying $879.40 per month for his total premiums for Medicare A,B,and D plus a supplement. Now understand that Medicare pays under Part C,Medicare Advantage, a premium to the commercial insurance company of right at $1,000 per month plus a drug subsidy. This effective differential of about $120 per month between traditional and non-traditional Medicare is why many are saying the commercial insurers are overcharging for Part C Medicare Advantage plans. Of the approximately 67 million Medicare beneficiaries, about 34 million are on Advantage Plans and this proportion favoring Advantage plans is growing at a high rate. Do the math and see the potential overcharge in the billions.

Kaiser Family Foundation (kff.org) reported in February 2023 that for the years 2018-2021 the average profit for the commercial insurance companies per enrollee under Medicare Advantage plans to be $1,730 per year. This is against a basic premium of about $12,000. Medicare and health insurance laws and regulations require at least 85% of the premiums collected to pay for direct medical expenses. If the companies pay less, then they have to rebate premiums to the insured. This is why many Advantage plans charge the enrollee no premium. This is why they pay for additional non-Medicare benefits. This is why some people get a so-called rebate against their Part B premium. This is why some Plan D companies like WellCare will charge only fifty cents a month next year for premium, a reduction of 95%! This is why a major company in Georgia last year sent each Advantage plan enrollee a $500.00 check and suspended premiums. And so on.

Again from Kaiser, in 2021 total Medicare benefits paid totaled $829 billion. Of that $468 billion was for traditional Medicare direct claims and $361 billion was in payments to commercial insurance companies for Medicare Advantage plans. This latter amount tripled in just 10 years due to the tremendous growth in Advantage plans of nearly 20% per year. Whereas the growth in Medicare enrollees is about 8% per year.

If these trends continue many different possibilities could be seen. Medicare could reduce transfers to commercial insurance companies, but this is very unlikely due to the power the companies have over so many politicians and the shear amount of money at stake. Further rebates against Plan B premiums could be made, but this is actually very limited. Companies could further expand coverages by broadening provider networks. Companies could reduce copays and deductibles. None of these are simple and each could have huge ramifications. As I see it there will need to be an equibrilium between traditional Medicare and a supplement versus Medicare Advantage. If one gains too much over the other then significant changes must be made or our choices will be severely limited compared to what we have today. And, not being political, but remember the first version of the Affordable Care Act eliminated Medicare Advantage to return everyone to direct federal funding of benefits under traditional Medicare. This was quashed due to certain senators in certain states that favored Medicare Advantage plans withdrawing their support which would have stopped the legislation. In the way of political reality, the provision was dropped and we have since seen a tripling in the number of people using Advantage plans.

JNF - The bottom line is all "available" money is in Advantage plans and in the traditional American way, business will fight tooth and nail to get at the money one way or another. This includes working the politicians, misleading advertising, and so on. I suspect things would change a bit if old people were allowed to change out of Advantage plans at will like some states allow with guaranteed acceptance.

I think the single thing I like about Supplement plans is claims are processed by Medicare (a person with no incentive to not approve something) and I have never had a claim questioned by our BCBS supplement in 5 years. When I call Medicare about something, they just recite the "if medically necessary as determined by your doctor" as the justification for most things. Not sure how you assess this benefit but I remember many hours of phone calls trying to straighten out private insurance claims with doctor offices, getting prior authorizations, and no one got paid in the meantime.

The insurance agent who helped me enroll (and others I spoke to) told me that they actually get higher commissions by enrolling patients into the FFS original Medicare, rather than into the Advantage programs.

Logically, it makes no sense that Advantage would cost the taxpayers more than the FFS plans. Think about it. The Advantage plans actually MANAGE care and costs. That was the purpose behind the advent of Advantage plans in the first place. Prior authorizations, referrals, and patients must see network doctors in network hospitals. In FFS, the patient could actually get 6 second opinions on a medical condition from 6 different docs (no referrals necessary) and get it all paid for by the government. Plus, the FFS plans attract sicker patients, since they have much more freedom in selecting docs and treatments of their choice. Plus, the drug selection is much more liberal and generous, as long as the patients forks an extra $30-$40 dollars a month for a decent Part D insurance plan. Many specialty drugs are not even covered under the Advantage programs, and if they are the patient has to pay through the nose to get them.

Under FFS - care is not really managed. It's a free-for-all, as long as the patient is willing to spend the extra money for medigap insurance, which wouldn't really cover the difference if the patient has several medical conditions and take expensive pharmaceuticals. For instance, if I had to get one of the popular ADT drugs under my Advantage formulary it would cost me thousands annually. I've read anecdotal posts from FFS patients that indicate access to some of the latest and greatest ADT drugs at little or no cost out-of-pocket.

One reason the Advantage plans can offer other benefits (vision, dental, etc...) over and above what is offered to FFS patients is due to cost savings realized on the Part B end of the reimbursement scale.

Medicare an unbelievably complex financial conundrum. One practically has to be a CPA and dig deep into the weeds to understand how the money changes hands and how it's being spent on what.

Many special interests are involved. Special interests are going to advocate for whichever system rewards them the most. This is the reason you find so many conflicting analyses and opinions.

Reforms are needed across the board to ensure the future solvency of Medicare.

I'm happy with my Advantage plan (based on my particular situation) and have no regrets on my choice.

Roger that, Mumbo. Let's enjoy it while we can.

I just don't know how our kids and grand kids are going to pay for it all going forward with all us old people jumping aboard the Medicare train. Maybe AI will figure it out and we'll all live happily ever after. Hope springs eternal.

Good discussion.

TJ, a couple of points.

I think you got confused by your agent regarding commissions, either you misunderstood or he/she misrepresented. Commissions have a range and are controlled by state statutes. For 2024 the commission ranges for Advantage plans first year is from $601-$750 and renewals range from $300-$381, depending on the state, California being the highest. For a Supplement Plan the range among states is very narrow and nationally the average first year is 22% and renewals are 10%. For example, my Plan G cost $94.00 per month so the agent first year would have received $248 and each renewal would be $112. Advantage Plans pay the agent 3x the commission they would receive from a supplement plan. Any wonder why far more marketing for Advantage plans is very evident in all forms of marketing media, advertisements and direct mail. Duh….

Your straw man argument that people on a supplement plan will seek six specialist opinions isn’t born out by facts. I in a million might do so, but as we all know very few people actually seek a second opinion in most cases. Just look at the anecdotes of the men on this board as to the overwhelming majority that had surgery at the hands of the urologist that provided the diagnosis. Not only did most of these not even seek assessment by a second surgeon, it is rare to find the ones that actually met with even one radiation oncologist. I am a clear outlier as I met with two surgeons and two radiation oncologists before deciding. I encourage others to do so, but very few ever take the advice. On the other hand we know that over the last 50 years of managed care one of the top complaints is restricted access to specialists and additional assessments.

To further the cost trend we are seeing in the proportions of traditional Medicare and Advantage plans, Kaiser projected that 2023 will see the Advantage plan cost crossing over 50% of total at $473 billion and traditional Medicare at $443 billion. Projections for 2031 have Advantage plan cost at 60% of total at $943 billion versus traditional at $693 billion. Remember just 10 years ago Advantage plan cost was only about 35% of the total.

I will repeat " I suspect things would change a bit if old people were allowed to change out of Advantage plans at will like some states allow with guaranteed acceptance."

It sort of sneaky that you have to make a decision under a time crunch at 65 and if you choose an Advantage plan, game over after a short trial period. If Advantage plans can get you early, you are in for the long haul with them which is unfortunate. I would have not hesitated to try an Advantage plan if I could easily switch to a decent Supplement plan at the annual signup. The first decision is a big one.

I’ve also picked up a lot of “chatter” on Medicare Advantage agent sites and have spoken to a few friends in the business. Turns out there was a Senate hearing yesterday regarding agent commissions and marketing problems on Advantage plans. Oregon Senator Ron Wyden has been on this for years saying Medicare Advantage plans are too costly for the government and the high commissions are one of the problems. He doesn’t see why agents should get much more money selling Advantage plans than when they sell supplement plans and contends there is inappropriate bias in the system. He also thinks there is a lot of bad information and inappropriate marketing and sales information regarding the plans. Thus, agent groups are getting concerned that efforts to clean up the higher costs of Advantage plans could make their business much less lucrative.

There is a lot of confusion about Medicare expenses, so some data may be in order. Medicare costs continue to rise, but the cost per beneficiary has leveled off and since 2011 has been essentially flat. The total cost of Medicare has continued to rise, but only because the number of beneficiaries has increased. Health experts are unsure why the cost per beneficiary has been flat for more than a decade, but this is a hugely beneficial shift. It is estimated to have saved $3.9 trillion compared to what spending would have been had the previous rate of increase continued. This NY Times article begins with a great graphic:

https://www.nytimes.com/interactive/2023/09/05/upshot/medicare-budget-threat-receded.html

TJ, you were clearly lied to about commissions. So what else did the agent lie about? And how many other people has he/she lied to? And is this typical of the organization the agent is part of? Please do the responsible thing and file a complaint with your state insurance commissioner. I am very strong on this as I have, and continue to hold appropriate insurance and financial services licenses for 50 years and am adamant about ridding the business of bad apples.

I am glad you like your Medicare Advantage plan and that it works well for you. I like that we have choices. However, I don’t understand your need to rationalize the so-called cost saving compared to traditional Medicare when there are numerous studies that show the exact opposite. And that congress is seriously investigating the reasons that Medicare Advantage plans cost the taxpayer much more money than traditional coverage. One troubling aspect that is well reported for many years is that claims administration costs for Medicare advantage plans is about ten times as much as traditional Medicare. Couple that with the much higher agent commissions and phenomenal growth show me that significant changes must take place.

Hi Vince. Sorry you had problems with the VA. I enrolled back in Year 2000 or thereabouts. At that time all I had to show was my DD Form 214 to prove I served active duty and was honorably discharged. I'm sure they did some internal checks.They took my photo and I received my ID card. I had relatively small co-pays for treatment. That was it.

TJ123 said...
Hi Vince. Sorry you had problems with the VA. I enrolled back in Year 2000 or thereabouts. At that time all I had to show was my DD Form 214 to prove I served active duty and was honorably discharged. I'm sure they did some internal checks.They took my photo and I received my ID card. I had relatively small co-pays for treatment. That was it.

I just found this from the Columbus Dispatch:

“However, means-testing was added for those lacking a service-related disability in 2003 under President George W. Bush and a Republican Congress, when the government was looking for ways to cut government spending. It applied to all new enrollees without the service-related disability.”

I tried enrolling in about 2012. I feel that this is pretty unfair.

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