Why Are Medicare Advantage Plans So Bad?
Why do so many people bash Medicare Advantage? Yet, in every Part of the country, Medicare plans are expanding, and more people are joining. Why are Medicare Advantage plans considered so bad when they attract so many people and keep them as loyal customers?
What Makes Medicare Advantage Plans Bad?
The main reason is location, location, location. Medicare Advantage plans are designed for a particular location, usually a county or collection of counties that make up a region. Medicare Advantage is unlike Original Medicare (only Part A and Part B). Original Medicare is uniform and homogenous throughout the country. Medicare Advantage is not. One plan with the same insurance company may drastically differ from one city to another. In the same state, a plan may be great in an urban area but incredibly poor in a rural area 40 miles away.
When people criticize Medicare Advantage, they create a straw man. They pick the worst locations and the weakest plans. Then they compare those Advantage plans to Original Medicare with the additional insurance product of a supplement. The plans they use as models have high out-of-pocket costs, high copays, limited networks, and low star ratings. Consequently, Medicare Advantage makes a poor showing in those instances.
What Are the Common Pitfalls of Medicare Advantage?
High Out-of-Pocket Costs
Critics claim that Medicare Advantage plans have high out-of-pocket costs. Medicare Advantage’s maximum out-of-pocket (MOOP) for 2023 is $8,300 nationally. That is the highest out-of-pocket an insurance company may charge on a Medicare Advantage plan.
Insurance companies can set the maximum out-of-pocket (MOOP) lower than the allowed amount. On average, the MOOP was $4,972 in 2022 for in-network and $9,245 out-of-network nationwide.
The MOOP is the highest amount you are responsible for on the plan. Copays add up. If you meet the MOOP total of $8,330–or whatever the amount is–the plan pays 100% on any claims after that.
No Maximum Out-of-Pocket for Original Medicare
Compared to Original Medicare, however, Medicare Advantage has a top limit–a maximum out-of-pocket. Original Medicare has no maximum or cap on the Part A deductible. The Part B coinsurance is an unlimited 20%. Twenty percent of a million dollars is real money!
Those costs that Original Medicare does not pay are only covered if you purchase additional health insurance with a Medigap plan. You need to pay an additional amount to add a Medicare Supplement. A Medicare Supplement in the Omaha, Lincoln, and Council Bluffs areas for a 65-year-old ranges from $1,400–$2,000 per year for a Plan G on top of your Medicare Part B premium, which is currently $164.90.
I work primarily in the Omaha, Lincoln, and Council Bluffs Metro areas. Our maximum out-of-pockets are lower than the national average. Some Medicare Advantage plan MOOPs are as low as $3,800.
Nonetheless, $3,800 or $8,300 is a great deal of money for most people to come up with in a year’s time. It is a legitimate concern, so a person may wish to consider a Medigap Plan N or even High-Deductible Plan G as an alternative to Medicare Advantage. However, many people feel a $4,000 or $5,000 maximum annual out-of-pocket is reasonable for a health insurance plan. It is the same or lower than many employer health plans people had in the course of their working years.
‘Is There A Doctor In the House?’
Like your employer health plans, Medicare Advantage plans are usually network plans. The most common types of plans are HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization). The HMO plans generally mean you can only see health providers in the plan’s networks. If you go outside of the network–aside from emergencies–the plan will not pay. PPO plans allow you to go outside the networks to providers who take Medicare, but you may pay more for those services, and your MOOP will be higher.
Network plans can be limited in certain areas. Many rural areas have weak Medicare advantage plans. One of the reasons is that many providers or medical facilities do not work with the plans yet. In those instances, Original Medicare would probably be a better choice with or without a Medicare Supplement.
In other places, I’ve found that the different medical networks compete aggressively against one another. Part of their strategies is to align with specific insurance companies providing Medicare Advantage against their competitors. In this way, a plan might have a limited network of doctors and hospitals. In those situations, an agent must be acutely aware of his client’s needs and weigh all the factors. Depending upon the limitations, Original Medicare may be the better alternative.
Medicare in our Omaha, Lincoln, and Council Bluffs areas are blessed with three robust networks that cooperate with the six insurance companies offering plans in the area. The three networks work with all the plans. Networks and access to providers are non-issues here.
Referral, Or Not Referral
Some Medicare Advantage plans require a referral from your primary care physician (PCP) to see a specialist. The purpose of the referral system is to coordinate care and reduce costs.
In our area, the HMO plans are “open access.” Open access means no referral is required to go to a specialist when you need one. As a matter of fact, it has been years since Medicare Advantage plans required referrals in our area. However, some plans in some areas still require referrals, which some feel is a drawback.
Medicare Advantage Plans Change Benefits Every Year
Critics of Medicare Advantage site plan changes as a negative for Medicare Advantage. However, Original Medicare also changes. Medigap companies increase premiums almost every year, even several times a year, because of age, higher than normal claims, and inflation. Medicare Part D prescription drug plans DEFINITELY change yearly–premiums, deductibles, copays, and formularies are reworked every year.
Each year the Medicare Advantage plans mail out the ANOC (Annual Notice Of Changes). An example of changes is: the maximum out-of-pocket may increase. Copays may increase or decrease. Extra benefits, like dental and vision, may be increased or reduced, added or eliminated. You will experience change no matter which direction you go with Medicare.
Over the decade I have offered Medicare Supplements, Medicare Advantage Plans, and Medicare Part D prescription drug plans, all of them changed. Nobody is not changing–sorry for the bad grammar. Some years there are a lot of adjustments. Most of the time, the changes are minor. The changes really hinge on the funding the federal government pumps into Medicare or not and the rate of inflation.
In our area, the Medicare Advantage plans have actually gotten significantly stronger over time. MOOPs have lowered. Additional benefits, like dental, vision, and over-the-counter (OTC) items, were introduced and increased.
Medicare Part A & Part B usually change each year. The Part B premium increases, though it went down slightly this year. Deductibles increase. Part A deductible increased from $1,556 to $1,600 for 2023. Most people don’t notice Original Medicare changes because, if they have a Medigap policy, their supplement takes up the slack. They may not be aware until they get notice of a rate increase from the insurance company. Then, they blame the insurance company for the higher premium, not Medicare. A big part of the higher premium is because Medicare expanded the gap the insurance company needed to fill.
Part D Drug Changes
The biggest problem I have found with the Medicare benefits changing every year is with Part D prescription drug plans. Those on Original Medicare and a Medigap plan have Part D plans. The challenge is insurance companies change the drugs that are covered or not covered. The copays, deductibles, and premiums can change significantly in some years. Companies move drugs from one tier to another. The Gap (or “Donut Hole”) amount fluctuates from year to year. I find Part D plans change significantly compared with the drug element of Medicare Advantage plans.
Clients who ignore the changes in their Part D plan find themselves in a world of hurt come Jan. 1st when they go to the pharmacy counter to pay for their prescriptions.
Whether you are on the Medicare Advantage side or Medigap and Part D side, there is plenty of change to go around.
Medicare Advantage Plans Requires Prior Authorization
Critics of Medicare Advantage point out that Original Medicare does not require prior authorization for most services. Medicare Advantage, however, does require prior authorization for many.
The criticism is the delay that pre-approval causes. Detractors claim denials are higher for Medicare Advantage than Original Medicare, and the appeal process for denials is arduous.
Preauthorization can be a challenge. You may have faced it with your employer’s health plans. Getting approval from the insurance company is not a new idea. In the past with Medicare Advantage, denials may have been higher. Currently, denials are around 4 percent the first time around. Upon appeal, 75 percent of appeals are overturned. I hear more complaints from clients on Original Medicare and a Supplement. Last week, Medicare refused to pay for my client’s ambulance ride to the emergency room at 3 AM. I helped her with the appeal process.
For urgent cases, you can receive treatment and get approval afterward, or they will rush approval with a response in 72 hours or less.
Changing Your Medicare Advantage Plan
Medicare Advantage critics claim you can’t get out of your Medicare Advantage plan except during a short window of time each year.
Generally, you can only change your Medicare Advantage plan during the Annual Election Period (AEP), which is Oct. 15th- Dec. 7th each year. Ironically, for those on Original Medicare, that is the only time you can change your Medicare Part D prescription drug plan as well. Medicare limits everyone on Medicare in one way or another.
Medicare Advantage also has more times to change than those on Original Medicare. Medicare Advantage has its own unique Open Enrollment Period (OEP) from Jan. 1st–Mar. 31st, when you can make a one-time switch to another Medicare Advantage plan or change back to Original Medicare.
The advantage of Medicare Supplements critics assert is that you can change your supplement year-round. Changing a supplement, however, is subject to underwriting in most states. There is no underwriting for Medicare Advantage. Insurance companies offering Medicare Advantage plans must take you regardless of your health.
Medicare Advantage Does Not Travel
For many years Medicare Advantage plans were criticized because they were only local, especially HMO plans. The health coverage did not travel with you when you left home, except for emergencies.
Now you are covered for not only emergencies anywhere in the U.S. and, in some cases, abroad, but there may also be in-network coverage. Many of the larger insurance companies also have national networks to which the HMO plans have access, so you could be outside your service area and still get service and pay in-network copays.
You can also select a PPO (Preferred Provider Organization) plan. In a PPO, you can go out of network to a provider who takes Medicare. You may pay a higher copay, and your total out-of-pocket may be larger than in-network, but you will have access to non-network doctors and hospitals with a PPO plan.
Medicare Advantage plans are bad when the networks are small, the MOOP and copays are high, and customer service makes prior authorization a headache. Many rural areas have Medicare Advantage plans that are bad. Some insurance companies design Medicare Advantage plans that are poorly constructed, even bad. Like markets for many products or services, the areas and the companies may not produce the best product or service.
Caveat Emptor – Let the Buyer Beware!
The consumer needs to do his due diligence and use a reputable agent who will give you an honest assessment of the products in your market. Does the plan have good access to medical providers? Are the copays and maximum out-of-pocket reasonable for your budget? Is the company behind the plan strong and well-staffed to provide good to excellent service?
In the decade I have offered Medicare plans and supplements, I have seen the landscape change regarding insurance companies and products. For Medicare in the Omaha, Lincoln, and Council Bluffs areas, Medicare Advantage plans have continually improved with broader access to networks, low copays and MOOPs, and tremendous service to resolve issues as they arise. Some other places are not as good for Medicare Advantage. Many counties in rural Nebraska and Iowa still have no Medicare Advantage plans, or the plans are very weak. Each plan needs to be judged on its own merits, particularly when you are comparing it to Original Medicare and a Medigap policy, and a Part D prescription drug plan.
The question has changed from “Why are Medicare Advantage plans so bad?” to “How are Medicare Advantage plans so good?”