The things to remember about “Medicare Advantage” plans is that 1) they are not Medicare, and 2) they may offer little or no advantage. They are a form of private insurance, cost Medicare a lot of money, and in some situations (especially when you are sick) can indeed hurt you.
Let’s get to the first. Medicare was created in 1965 to
provide universal health care to senior and disabled people. It was a tremendous
victory for those who had fought for decades to have a universal health
insurance system in the US. It was also strongly opposed by those who thought
their pocketbooks might be hurt, specifically the AMA, as well as other
right-wing forces that just opposed everything that might actually help most
people (and thus most Great Society, and even New Deal, programs). The
supporters never envisioned that Medicare would be the end of the road,
especially when, in the same year, Congress passed Medicaid, a federal-state
collaborative program that was aimed at helping the poor access health care.
They assumed that it would be expanded to finally include all Americans.
Of course, many of the opponents of Medicare didn’t give up either. The AMA, while never contrite, shut up about it after it became clear that rather than hurting physicians’ incomes, Medicare was a bonanza for them, ensuring payment for services had often previously been unable to collect for. Those who hate programs that benefit people, of course, are still around. But the most insidious and dangerous threat is from those who see any government program as a way to make lots of money, especially if it can be privatized without much risk to the private sector investors. This is really how Medicare (and many other public programs) have been most insidiously and effectively attacked -- by privatizing its programs to guarantee lots of money for the profit of the private companies, and largely insulate them from risk.
Enter Medicare Advantage (MA). MA plans are largely run by insurance companies (and
sometimes by venture capital groups) and are called “Part C” of the Medicare
program, but they essentially take people out of Medicare and put them in a private
managed care program. These companies then get the money that would have gone
to the Medicare program (we’ll call it Traditional Medicare, or TM) for you.
Plus they get extra money. Why do private companies caring for you under MA get
more money than TM allocates for you? Because they do, right. Because the pro-for-profit
“caucus” (PFPC) of the Congress, from both parties, wanted to increase the
portion of people in Medicare entering MA. So these companies could make more money.
And contribute more to the members of the PFPC.
Remember the old phrase “feeding at the government trough”? That is what these companies do, very well. Virtually no public function that is privatized becomes more effective at delivering service, since the amount of profit generated is increased by providing less service. To the extent that it sometimes seems to look better, it is almost always because of 2 things: that the public services were starved for funding in the first place, making them look bad and justifying the call to privatize them, and that private companies’ inefficiency, corruption, and overall bad acting is harder to ferret out than government agencies’.
How do MA plans make more money? In the traditional HMO
manner, they limit access to a “panel” of doctors and hospitals. These are not
necessarily the worst ones in your area, but they are the ones that the plans
have negotiated the best deals with, for which they pay the least. They attract
members with some perks like vision care, hearing care, etc., which can be useful
if one is generally healthy. And of course, MA plans vary in quality and in performance;
some of those covering state employees by contract have performed better
possibly because of having a more educated, informed, and influential client
base. But this is not always the case; see
the example of city workers’ resistance to Mayor Eric Adams of NYC trying to
push retirees into MA.
And do not consider for a moment that the goal of any of these programs is to provide excellent health care: it is to make money. And that they make money is demonstrated by the aggressive marketing that Medicare-eligible people get from these companies, not to mention television advertising. The Commonwealth Fund recently published a piece called “The Role of Marketing in Medicare Beneficiaries’ Coverage Choices”, which describes this in detail. ‘Soaring private plan enrollment has led to a sharp increase in marketing and sales efforts, some misleading and inaccurate.’ It goes on to explain in how MA works and how they market. It also notes that about 1/3 of Medicare beneficiaries used an insurance broker; a boon to that private sector industry as well. MA plans can keep 15% of the money they get for profit and overhead, having to spend only 85% on actually delivering care (which they call the “medical loss ratio”!)
The way that MA plans make money is enrolling lots of people, many of whom are healthy (Wow! Free gym membership!) and don’t cost them much, and then submitting bills that make their patients look like they are as sick as possible thus inflating their bills (called “upcoding”). At best this an effort to maximize revenue from Medicare, which there is no incentive to do in TM. Plus, if they can get certain poor people enrolled, they can collect an additional $350 for each one regardless of whether they actually provide any care! This was implemented with the theoretical idea of increasing equity by incenting the enrollment of poor people, but really has the opposite effect since those folks now have their care restricted when they are sick by the private insurance company, while under TM it would not be. And, of course, they make money by fraudulently overbilling Medicare for billions of dollars, winning the Lown Institute’s 2022 “Shkreli Award” for bad behavior by corporations!
MA is not the only way Medicare is being privatized. As I have written before ("Private Equity": Profiteers in nursing homes, Medicare Advantage, DCEs, and all of healthcare, Sept 16, 2022; Direct Contracting Entities: Scamming Medicare and you and bad for your health!, Feb 7, 2022), the Center for Medicare and Medicaid Services Innovation Center (CMMI) implemented Direct-Contracting Entities (DCE), which was renamed REACH as of January 2023 (without any other significant change). REACH has allowed the creation of mostly investor-owned companies that contract with primary care practices (often already owned by corporations, not owned by the doctors) and voilà, all of those doctors' patients are in their REACH group, which then gets the money that Medicare would have paid for you. What is really tricky is that, unlike MA, you didn’t have to choose it; they choose for you by contracting with the group (often corporate) that owns your primary care practice! And your doctor may not even know that s/he is in one! You can only get out if you can find another doctor who is not in one – particularly difficult in rural or urban underserved areas where even finding a doctor is hard. Not to mention that REACH is even more lucrative than MA, as it allows the private company to keep 40% of its take as profit and overhead, spending only 60% on patient care!
The effort to privatize Medicare is absolutely the wrong way to go. The way to go is to keep the structure of Traditional Medicare, where anyone can use any doctor or hospital, where there is no profit taken out, and overhead is about 2%. And then increasing its benefits so that it covers 100% (not 80%) of approved charges so people don’t have to get a Supplement Plan, as well as cover dental, vision, hearing, etc. This is affordable, since it could be funded by money now used to generate huge profits for private investors, but could actually be used to improve our healthcare. While we still need to address access in terms of geography and specialty distribution, eliminating the profit motive will make major steps toward access and improved quality.
Then we can have Healthcare for All.