The case for transition from the ACA Obamacare model to Medicare Advantage universal health insurance coverage.
Many health insurance agents who work with both the Affordable Care Act for individuals and families and Medicare Advantage plan for seniors have often wondered why Obamacare wasn’t built around the existing Medicare Advantage design. Medicare Advantage health plans are run by private or locally organized health plans to administer Original Medicare benefits to their members. The Center for Medicare and Medicaid Services sets the rules and reimbursement rates for these plans. In other words, we already have a model of national subsidized health plans that could be extended to individuals and families under 65 years old who are not offered employer sponsored health insurance.
Basics of Medicare
Original Medicare is for individuals over 65 years old or under 65 but determined disabled. Medicare Part A is hospital insurance and is usually premium-free for people who have worked for 10 years or married to an individual who worked and paid the Medicare taxes. Medicare Part B is for out-patient services such as doctor visits, labs, imaging, and drugs administered in a hospital. The Part B premium for new Medicare beneficiaries in 2017 is $137 per month. Medicare Part D is drug coverage for prescription medication ordered by a doctor and purchased through a pharmacy. The monthly premiums for the Part D prescription drug plans can range from $15 to $80 per month.
Simplified Member Out-Of-Pocket Costs
- Part A Hospital Deductible $1,316 per 60 day beneficiary period
- Part B Out-Patient Deductible $183, then 20% coinsurance
- Part D Drug Deductible $400*, then copayments and coinsurance for included drugs.
In general, Original Medicare, Part A and B, coupled with Part D is pretty good health insurance for a 65 year old, considering the premiums for all parts can be low as $152 per month. Original Medicare is also a nationwide PPO plan where beneficiaries can see any provider in any state to receive treatment. The Medicare beneficiary pays any deductible and coinsurance for the services and the provider bills Medicare for the balance. *Some PDPs have no annual deductible.
Medicare Advantage Health Plans
In an effort to control costs, and hopefully delivered more coordinated health care services to seniors, Medicare Advantage plans were born. Medicare Advantage plans, also known as Part C of Medicare, are run by either private health insurance companies or locally organized health insurance plans. Medicare Advantage plans handle all of the benefits for members. They pay the providers after any applicable copayment or coinsurance for services from the member, just like a regular health insurance plan. They also assume all the risk for potentially large medical expenses of the members because Medicare Advantage plans have a maximum member out-of-pocket amount unlike Original Medicare.
Most Medicare Advantage plans either have no monthly premium to the member or a low premium between $25 and $100 per month. Medicare Advantage plans are any insurance where the federal government pays a monthly capitation amount to the health plan to subsidized its cost to consumers. Consequently, Part D prescription drug plans are also considered Medicare Advantage plans.
Medicare Advantage plans must be actuarially equivalent or better than Original Medicare. That means that the average person enrolled in Medicare Advantage plan will pay no more for health care than if they remained in Original Medicare. Most Medicare Advantage plans are structured like a traditional health plan with modest copayments to visit a doctor and 20% coinsurance for other benefits. Many Medicare Advantage plans also include the Part D prescription drug insurance and are known by the acronym MA-PD.
How Do Medicare Advantage Plans Make Money?
By now you are wondering how the Medicare Advantage plans could possibly insure older adults when they may have no monthly premium? When a Medicare beneficiary enrolls in a Medicare Advantage plan, Medicare pays the plan a monthly capitation amount to the plan. This amount for a standard Medicare Advantage health plan can range anywhere from $730 to $880 per month, before any bonuses for performance.
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How Does Medicare Know The Health Care Costs?
The next question is how did Medicare arrive at a specific monthly dollar amount to subsidize Medicare Advantage plans for Medicare beneficiaries? Medicare is nationwide and has millions of beneficiaries throughout the United States. They have set reimbursement rates to doctors, hospitals, labs, imaging centers, and other providers of Medicare health services. Medicare knows how much it will cost them per person to pay for health care services after the beneficiary has paid their share of cost. The Medicare database of health care costs is so detailed they can break it down to the county level of each state.
Medicare then takes this health cost data and publishes contract capitation rates by county. The organizations who want to offer a Medicare Advantage plan in a specific county look at what Medicare will pay them on a monthly basis and decide if they will offer a Medicare Advantage plan in that county, the benefit design, network of providers, and if they need to charge a premium to the enrolled members.
Medicare Advantage As Blueprint For Universal Coverage
Medicare Advantage plans are not perfect and they don’t work for every Medicare beneficiary. Some counties may not even have a Medicare Advantage offered in their county leaving Medicare beneficiaries the only option of Original Medicare. However, before there was the Affordable Care Act, we already had a nationwide system of subsidize private insurance for the disabled and those over 65 years old. Both the insurance companies and providers who wish to participate in Medicare know how to work with the system. Health insurance companies know how to create Medicare Advantage plans, enroll Medicare eligible individuals, pay claims, and receive the monthly capitation amount from Medicare.
Medicare has actually built a website similar to the ACA Marketplace exchanges like Healthcare.gov or Covered California. Whether a person has just become eligible for Medicare or reviewing their options during the Medicare Annual Enrollment Period, they can go to Medicare.gov to see the options in their county, pick a plan, and enroll right online. They can also use an insurance agent or contact the sponsor of a Medicare Advantage and enroll direct.
The similarities between Medicare Advantage plan and the ACA plans through the Marketplace are straight forward. Individuals are enrolling in private ACA health insurance and the federal government is subsidizing part of the cost of the health insurance to make it affordable. One of the main differences is how the federal government reimburses the insurer. Medicare beneficiaries receive an indirect subsidy to purchase a Medicare Advantage plan according to county they live in and based on historical health care cost data. Individuals and families enrolling in a health plan through an Affordable Care Act exchange receive a subsidy based on their income.
Downside to Medicare Advantage Plans
There are lots of different types of Medicare Advantage plans, not all of which are available to all beneficiaries. Most Medicare Advantage will limit the network of providers available to the member. This is to control costs by funneling members to providers with whom they have negotiated contracts with. This is not too different from the narrow networks experienced by individuals and families enrolled in ACA health plans. In certain states like California, most of the Medicare Advantage plans are HMOs. People who don’t like HMO style health care usually won’t enroll in a Medicare Advantage plan. They will stick with Original Medicare, and if they can afford it, purchased a Medicare Supplement plan to help cover the member cost-share for the Medicare deductibles and coinsurance.
Upsides Medicare Advantage plans
Medicare closely monitors the Medicare Advantage health and drug plans. Medicare publishes annual star ratings for each plan based on assessments they receive from the enrolled members. Medicare frequently assesses penalties on Medicare Advantage plans that violate their rules. The worse penalty is being put on sanction, which means the Medicare Advantage sponsor is prohibited from marketing their plans and cannot enroll new members until they correct the violations. Medicare also heavily regulates the marketing of the Medicare Advantage plans and restricts what agents can and cannot say when presenting Medicare Advantage plans to a beneficiary.
The main benefit of moving toward a Medicare Advantage style of universal health care for individuals and families without employer sponsored health insurance is that virtually every health insurance company already works with Medicare. Aetna, Anthem Blue Cross, Blue Shield, Cigna, Health Net, Humana, Kaiser, Molina and many other carriers already offer Medicare Advantage plans. They understand how Medicare works and what is expected.
One of the larger challenges of moving from ACA health insurance to the Medicare Advantage model is determining how the plans would be subsidized. It could still be based on the household income with additional considerations for region. The big benefit for Medicare beneficiaries is that unless they are applying for a low income subsidy, they don’t have to worry about how their income will affect the premiums for their health insurance. Families enrolling in an ACA plan have to fret over properly estimating their income so as to avoid having to repay excess premium tax credits or being inadvertently put into a Medicaid plan because they underestimated their Modified Adjusted Gross Income. A Medicare Advantage model for individuals and families could determine a flat monthly subsidy to be applied to any qualified health plan being offered.
Far Fewer Problems With Medicare Advantage Plans
I’ve been enrolling Medicare beneficiaries into Medicare Advantage plans for several years. The enrollment is fairly smooth; there are few surprises, the Medicare Advantage plan works well for my clients. When I contrast that to the individuals and families I enroll into Covered California ACA plans, the experience can be anything but smooth, it’s more on the level of a train wreck. While most enrollments into ACA plans can go well and the plans work for the families, there are large percentages, upwards of 20%, that have issues. There are issues with enrollment through the Covered California online application, people pushed into Medi-Cal for no apparent reason, doctors who refuse to accept Covered California plans, billing problems from the carrier, and 1095-A problems from Covered California.
The most exasperating part is no one seems to be accountable. Doctors are not punished for discriminating against Covered California members. Health insurance companies and plans are not punished for their stupid billing problems. Covered California is not punished for their program errors or the incorrect 1095-As they send to people. Medi-Cal is not punished for their horrible customer service and not releasing individuals and families who are not Medicaid eligible. The Affordable Care Act needs a serious overall.
Arthur Wheeler, a health insurance agent in Florida, has come to the same conclusion as I have about transitioning the ACA over to the Medicare Advantage model. Mr. Wheeler and I have very different opinions about the pros and cons of Obamacare, its impact, and future. But even though we approached the problem from different perspectives, because of our experience with Medicare Advantage plans, we have nonetheless come to the similar conclusions. I like Wheeler’s concluding statement about transition to the MA-PD model.
Medicare Advantage Plans will go a long way toward lowering the cost of Obamacare. It will eliminate a lot of bureaucracy and quickly put in place, the business relationships that have worked to deliver the very successful MAP health care program, which now covers more than 30% of our elderly population. Approximately 16.8 Million beneficiaries are enrolled in Medicare (Part C) Advantage. And, as of March 2015, the majority were enrolled in Health Maintenance Organizations. Despite the concern that Obamacare would lead to reductions in MAP enrollment, since ACA was enacted, the actual enrollment in Medicare Advantage Plans has increased 5.6 Million, or by over 50% which is a testament to its affordability and popularity.
A Medicare Advantage Extension to all those people, who are not covered by other programs will be a workable system of health care for this segment of our population. Primarily, this is because the MAP Extension satisfies all the interested parties involved. And, it allows for continued private sector administration that has demonstrated a potential for improved performance over time.
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Updated position papers on a Legislative Appeal and a The Best Bipartisan Answer can be found at:
Hybrid Medicare Advantage
For my part, I don’t think we’ll be able to directly copy the Medicare benefits of the MA-PD plans into individual and family plans. There needs to be multiple levels similar to what we have now in the Bronze through Platinum plans. The combination of lower benefit levels coupled with younger and healthier population sets for the plans helps lower the health insurance premiums, and by extension, any government subsidy. Another crucial piece of the puzzle is whether the current providers in the ACA individual and family networks will accept the reimbursements comparable to Medicare.
I completely understand what the authors of the Affordable Care Act tried to do when they developed the Premium Tax Credit subsidies based on household income. I also support the uniform health plan designs of the metal tier levels of Bronze, Silver, Gold, and Platinum to help consumers make informed decisions. What I don’t understand, and what Wheeler points out, is why they had to reinvent the health insurance model with the ACA when the Medicare Advantage model was already in place and proven. Even today, House Republicans are trying to reinvent the wheel for establishing some sort of universal health care coverage for all U.S. residents. What the Democrats and Republicans need to do is look at the Medicare Advantage model and they will see it meets most of their objectives for delivering affordable health insurance in a localized and efficient manner.