It’s a mad, mad Medicare system: Part 5

Free gym memberships, dental care and ‘zero premiums’? Is Medicare Advantage the Cadillac of coverage?

  • By
  • Contributor
  • August 30, 2011

The following is the fifth report from Guest Contributor Glenn Tornell, who’s investigating the “mad, mad, mad, mad Medicare system” as a prospective enrollee and then – with any luck – a beneficiary. His fourth report on Medicare is here. Or read the entire series starting with Part 1.

Want the skinny on Medicare Advantage plans? Ask my friend Ron.

“Mine is so good I hardly know it’s there,” says the 71-year-old retired university administrator who, thanks in part to a perk in his health plan, has lost almost 120 pounds in the past year.

The former 288-pounder is now a svelte 179 and can be spotted just about every day at the Fargo YMCA, where he regularly lifts weights, dances in Zumba fitness classes twice a day three days a week, and never misses a SilverSneakers session.

“I’ve been with Medica Advantage since turning 65 and just last year took advantage (pardon the pun) of its free “Y” membership. That’s about a $40 monthly benefit. I should have started sooner.”

But that’s not the best part. Despite undergoing medical care for a detached retina and broken ribs – along with surgery to relieve fluid on his lungs – the otherwise healthy septuagenarian says he hasn’t been charged a single copay or deductible in his six years on Medicare. And he hasn’t been inconvenienced by a single slip of paperwork. All that for a $122 a month through Medica’s top-of-the-line Advantage plan.

There are definitely cheaper Advantage plans on the market, and intriguing ways of using them. My brother-in-law Larry, who lives in Minneapolis, has been more than happy with his $49 a month Humana Advantage plan. “Besides having low monthly premiums, my only expenses for medical care so far have been office co-pays. I’m not complaining.”

Above and beyond Original Medicare

Ron and Larry aren’t alone in loving their Medicare Advantage plans. About 11.8 million Americans – or about of quarter of all Medicare beneficiaries – are enrolled in Medicare Advantage plans. There’s a good reason: The policies cover everything you can expect to be covered by Medicare Parts A and B, but they go above and beyond to cut your out-of pocket costs while adding benefit options.

And the policies NEED to go above and beyond. If you know the basics of Medicare Part A & B, you know that Medicare doesn’t come close to paying for all your medical expenses. Basically, outside of copays and deductibles, Medicare picks up about 80 percent of your hospital and doctor bills, leaving you responsible for the other 20 percent.

Most seniors want help in covering that extra 20 percent along with inflating copays and deductibles – and they look for that help from two primary sources: Medigap policies – which I covered in my last article – and Medicare Advantage plans.

Both cover expenses that Original Medicare doesn’t. Both are sold through private insurance companies, and carriers of both plans must follow federal and state laws designed to protect consumers. But beyond that, there are some big differences.

Options, options, options

If there’s one thing you can say for Medicare Advantage, it’s that the plans offer a dizzying array of options. Unlike Medigap plans – which are standardized by the government – Medicare Advantage plans can varying wildly in terms of plan structure and benefits.


Free gym memberships: Can you feel the burn?

In fact, there are literally hundreds of varied Advantage policies offered across the country. Many offer tantalizing benefits (hearing aids, dental care, vision, free gym memberships) that you wouldn’t expect to hear mentioned in the same sentence as the word “Medicare.”

And premiums can be enticing too, compared to Medigap – averaging $50 a month and ranging in cost from over $150 to zero. You heard me right: carriers even offer “zero-premium” policies, thanks in large part to federal subsidies. (More on that later).

Price variations are due in part to plan variations. Medicare Advantage comes in a handful of flavors, including a Medicare Health Maintenance Organization Plan (HMO), a Medicare PPO (preferred provider organization), a Medicare Private Fee-For-Service Plan (PFFS), a Medicare Medical Savings Account Plan (MSA), or a Medicare Special Needs Plan (SNP).

Those options make a big difference in important stuff, like whether you’ll need a referral prior to seeing a specialist, whether you’ll be encouraged to use in-network doctors, and whether you get prescription drug coverage. (It’s not included, for instance, in the MSA plan.)

Different policies have different rules when you seek medical care outside their networks, but the good news is that some of the larger Advantage companies have integrated networks that extend throughout the country. Under Ron’s plan, emergency room services are covered anywhere in the world.

And – again, depending on your plan – being away from your home for nine months (snowbirding in Florida or Arizona, for instance) may be as simple as notifying your agent and being directed to an approved medical facility at your new destination.

Your price may also vary greatly depending on how you customize your benefits. Here’s how Ron’s Advantage agent explains the versatility of the company’s plans:

“If you’re healthy and don’t see a doctor very often, you can choose one of our three cheaper plans. All include varying amounts of copays and other deductibles. If, by chance, you run into some health problem like two of my clients did with breast cancer, you can call me and I can move you into the Cadillac plan while you undergo treatments. Once your health is cleared up, I can then move you down to a cheaper plan.”

For some folks, a “Cadillac plan” may seem like a no-brainer.

Is Medicare Advantage an endangered species?

Back in the ’90s, Congress created the Advantage option on the theory that private health insurers could run Medicare more cheaply than the government could, using market forces and a system of managed care. That turned out to be wrong.

Medicare - an endangered species?

Advantage plans are much more expensive to manage for a variety of reasons, ranging from higher overhead and administrative costs to profit taking and waste. They are currently costing taxpayers an average of 14 percent more per person than traditional Medicare, according to the Medicare Payment Advisory Commission, an independent Congressional agency.

Put in perspective, the federal government pays private insurance companies over $1,000 per year for each of the 11 million current Advantage plan enrollees. That’s over and above the normal costs of Medicare that are paid to the companies (your Part B monthly premiums.)

During the recent fight over health care – and discussion about how to cut health care costs, those subsidies landed in the crosshairs. The Patient Protection and Affordable Care Act (aka Obamacare) cut almost $150 billion over 10 years from Medicare Advantage budget, partly to correct these problems. Those cuts start modestly in 2012 and build up.

But wait, there’s more. In attempt to prod the industry to tighten its belt and improve quality, the government then reinjected a few billion dollars more into the Advantage budget, giving bonuses to companies that perform the best. Starting next year, plans that have a rating of at least three out of  five stars on the quality rating system will receive these bonuses.

So no need to worry yet about the viability of these Advantage plans.

A few other details you should be aware of

  • If you have already enrolled in a Medicare Advantage plan, you cannot enroll in Medigap at the same time.
  • Most Advantage plans, except the most expensive, have copays for almost every visit to a doctor or hospital. For example many will have something like: $10 for doctor visit. $25 for specialist, $250/day for first 5 days of hospital stay. However, some plans cover just about everything, including all Medicare deductibles.
  • Advantage plans are NOT guaranteed renewable. The company can discontinue a plan at the end of any year. You would then need to find another Advantage carrier or return to Original Medicare.
  • Be careful with some of the cheapest Advantage plans. Because if you’re sick a lot, copays and deductibles can end up costing a lot. Fortunately, most plans have maximum out-of-pocket limits in the range of $3,000 to $5,000.

Need more information? Finding out what kind of Advantage plans are offered in your area is a simple matter of going online for a free Medicare quote based on your ZIP code. You’ll find lots of details, including premiums, deductibles, cost-sharing information for all drug tiers, and out-of-pocket limits.

As always, do your homework: Ask a lot of questions of your insurance agents and talk to your friends. A word of caution: most seniors, I’ve learned, can’t tell you what kind of policy they have.

If all else fails – and you think you’ve made the wrong choice, either with Medigap or Advantage – you can switch during the next open enrollment period without having to be underwritten again.