Well, it looks like the Biden administration has found its scapegoats for healthcare woes: Captain Kirk and Joe Namath. Because, you know, blaming celebrities is the best way to tackle issues like inflation and runaway costs. Who needs real solutions when you can point fingers at Hollywood, right?
Of course, nobody possesses a crystal ball capable of predicting their health during retirement. Nevertheless, concerns are escalating regarding Medicare Advantage, also known as Part C, which oversees Medicare coverage for over 30 million individuals. Major players in the Advantage sphere, notably Humana, are witnessing a significant uptick in costs and a decrease in profits, resulting in a stock plummet. Should these trends persist, they could lead to higher costs, reductions in ancillary benefits, and an increase in service denials.
Aside from financial challenges, Medicare Advantage is facing other pressures. Several prominent hospital chains and medical providers are pulling out of Advantage plans due to inadequate payments and administrative challenges. As insurers attempt to maintain profits by reducing payments to medical providers, patients may lose access to doctors and hospitals under Advantage plans. Of course, medical providers are resisting these cost-cutting measures.
Once in a pandemic-induced lull, doctor visits have skyrocketed, driving up insurers’ loss ratios—the share of premium dollars spent on medical care. Additionally, increasing demand due to aging demographics—a staggering 11,200 baby boomers hit 65 daily—adds to the pressure on insurers. Instead of addressing the root cause, the Biden administration has paid attention to a relatively trivial matter: advertisements.
The federal government is scrutinizing Advantage plans for practices that inflate costs. The Biden administration has specifically targeted Part C’s marketing, questioning its potential to mislead consumers, mainly through celebrity endorsements in TV ads, such as those featuring William Shatner and football legend Joe Namath.
This decision has raised questions about the administration’s priorities and ability to address the critical issues Medicare Advantage faces effectively.
Ron Mastrogiovanni, CEO of HealthView Services, anticipates imminent changes in response to these cost pressures. While Advantage has proven lucrative for insurers, rising healthcare costs, exacerbated by the pandemic’s aftermath, are shifting the landscape.
Humana, a prominent provider of Medicare Advantage plans, has expressed concerns regarding the industry’s pricing due to the unprecedented rise in medical costs. The CEO, Bruce Broussard, hinted at a possible market re-pricing. Moreover, a recent report from McKinsey & Company has identified significant changes within the Advantage sector, the most important transformation observed in the last 20 years.
The Biden administration has announced that it is allocating ample funds to Advantage insurers while simultaneously striving to end some of the industry’s unfair practices. The administration has suggested a 3.7% increase in payments to insurers between 2024 and 2025, totaling more than $16 billion. The exact amount will be disclosed by April 1. Additionally, the administration aims to control upcoding, clamp down on “predatory” marketing, and limit excessive compensation to brokers and agents.
Beneficiaries who are already enrolled in Advantage plans need not worry about any changes, as they will not go into effect until at least 2025. However, it is essential for those who are considering whether to choose Advantage or traditional Medicare to make an informed decision. While changing from one option to another is possible, it may not always be feasible to switch back to traditional Medicare, especially if the consumer wants to add Medigap insurance for additional coverage against medical expenses.
Although Advantage plans may seem cost-effective, offering low or even zero monthly premiums for many, they may not provide the same level of coverage as traditional Medicare plus Medigap. Furthermore, the cheapest Advantage plans may resort to more aggressive denial of care to manage costs.
Despite potential savings, Advantage enrollees still incur the Medicare Part B premium for outpatient services and potential out-of-pocket costs. Conversely, traditional Medicare requires additional premiums for Part D drug coverage and Medigap to limit out-of-pocket expenses. Advantage plans often sweeten the deal with ancillary benefits like free gym memberships and limited dental and vision coverage, not covered under traditional Medicare.
Studies present conflicting perspectives on the financial benefits of Advantage plans. While some suggest long-term savings, others indicate potentially higher costs over time, especially if one’s health deteriorates and requires more extensive care.
One significant drawback of Advantage plans is their limited provider networks, primarily if they operate as Health Maintenance Organizations (HMOs). Out-of-network visits may not be covered at all, potentially leading to unforeseen expenses for enrollees.
Moreover, Advantage plans typically require preapproval for specific procedures or tests, adding to its administrative burdens. Denials of coverage for traditional Medicare services also raise concerns regarding patient care and financial burdens.
