Medicare Advantage I

I have been hearing so much in the current health care debate about how expensive Medical Advantage plans are, and how the Democrats expect to save enormous amounts of money by cutting them back to the level of fee-for-service payments that I decided to do some of my own research.  My conclusion is that they may cost slightly more than ordinary Medicare, but they provide substantially more benefits.  In addition, the savings that would be achieved by eliminating Medicare Advantage would amount to $14 billion at most, a very small proportion of the suppose of $500 billion in costs that the administration is proposing to squeeze out of Medicare.  ( According the to Medicare Payment Advisory Commission Final Report, March 2010, p. 260, "In 2009, Medicare spent roughly $14 billion dollars more for the beneficiaries enrolled in MA plans than it would have spent if they had stayed in FFS Medicare.")

I have a personal interest in this.  I am a member of a Medicare Advantage HMO plan that provides excellent service, at lower costs to me than my previous plans under vanilla Medicare.  It receives the basic Subpart B premium that I pay, but also covers all my premiums under the Subpart D drug plan.  This saves my wife and me about $900 per year.  In addition, the Medicare Advantage plan is also more generous in covering costs of hospitalization, charging a maximum of $125 a day in the first five or six days, with all the additional costs absorbed by the insurance.  Medicare has an exemption of approximately $1100, that the patient pays for each impatient hospital visit, no matter how long.

Moreover, Medicare Advantage is a lot more efficient and easy  to use than basic Medicare.  Under standard Medicare, I would receive a separate bill for each activity.  I would ignore the initial bill because it would be no way of knowing how much I actually owned.  The doctor would submit his bills to Medicare at a list price that was unrelated to any amount that Medicare would allow.  Medicare would then adjust the price to its standard cost for my procedure, and I could not be charged for more than this price.  It would then reimburse the doctor for 80% of the cost, and I would ultimately get a bill from the doctor's billing office.  These would be for negligible amounts, for example, six dollars or $10, for which I would then have to write a check and deposit in the mail at the cost of a stamp.  The amount of paperwork is enormous, and must impose substantial administrative costs on every doctor's office.

In contrast, under my Medicare Advantage plan, I make a co-pay of $10 for every visit to my primary care doctor, and $30 for each visit to a specialist, and that's it.  No further bills.  I don't know how complex the billing system is between doctors and insurance companies, but I suspect it is simpler, because the companies can deal on the basis of capitation, and not just fee-for-service.

Of course, there are trade-offs for me.  I am not free to choose any doctor, but most go to doctors on insurance company's list.  However, when I investigated this issue before signing up, I found that my primary care doctor and four of my five specialists were in the plan.  It is also a local plan covering the Dallas-Fort Worth area, which means that I cannot go outside this area for routine treatment.  If I have an emergency out of town, I am covered, but not otherwise.  From a consumer's point of view, my Medicare Advantage plan is far superior to standard Medicare, and I am very unhappy that the Democrats propose to destroy this benefit.  Their rationale has nothing to do with superior service, or efficiency, but simply with the fact that the average cost to the government per Medicare Advantage patient is 10% greater than per Medicare patient.  Subsequent posts on this subject will consider the history of Medicare Advantage, and the reimbursement structure for insurance companies, and whatever else may come to mind.