Replacement and Supplemental Medicare Plans
November 30, 2018 8:41 AM Subscribe
Where does the money to pay for the operation and management of replacement Medicare plans come from? I was told by doctors at two hospitals that companies like AARP, Humana, United Healthcare and Aetna skim money off the federal benefit to fund their operation and make a profit.
And that's why the dozens of "tailored" plans may provide acupuncture or viagra, but if someone needs the care of full Medicare, it's not available anymore because there isn't enough money and the replacement plans can't and won't cover it. Is this true?
And that's why the dozens of "tailored" plans may provide acupuncture or viagra, but if someone needs the care of full Medicare, it's not available anymore because there isn't enough money and the replacement plans can't and won't cover it. Is this true?
No, that's not true. Medicare Advantage plans are required to cover all benefits that traditional Medicare does with equivalent or lower member cost-sharing (I say equivalent because MA plans often have copays for doctor visits where Medicare Part B has a 20% coinsurance).
As NotMyselfRightNow says, insurers are paid by the federal government to provide this coverage, with some plans also charging an additional member premium. The amount they're paid is roughly what it would have cost the government to provide traditional Medicare benefits. The extra benefits like acupuncture or gym benefits are in theory paid for by savings from (A) insurers negotiating aggressively with hospitals/doctors to pay them less than the government would and (B) care coordination and other strategies to improve population health and reduce costs/utilization. In practice, it's a mixture of that and positive risk selection (or cherry picking if you're being less charitable); MA plans have lower costs in part because healthier people tend to enroll on them. The payments from the government are risk adjusted to account for this -- they're paid more for sicker people and less for healthier people -- but there's mixed research findings as to whether that's 100% successful at negating effects of selection or not.
posted by bassooner at 9:25 AM on November 30, 2018
As NotMyselfRightNow says, insurers are paid by the federal government to provide this coverage, with some plans also charging an additional member premium. The amount they're paid is roughly what it would have cost the government to provide traditional Medicare benefits. The extra benefits like acupuncture or gym benefits are in theory paid for by savings from (A) insurers negotiating aggressively with hospitals/doctors to pay them less than the government would and (B) care coordination and other strategies to improve population health and reduce costs/utilization. In practice, it's a mixture of that and positive risk selection (or cherry picking if you're being less charitable); MA plans have lower costs in part because healthier people tend to enroll on them. The payments from the government are risk adjusted to account for this -- they're paid more for sicker people and less for healthier people -- but there's mixed research findings as to whether that's 100% successful at negating effects of selection or not.
posted by bassooner at 9:25 AM on November 30, 2018
Medicare replacement plans are primarily funded through the fixed, per-enrollee payment (also called capitated payments) that NotMyselfRightNow mentions. Some plans also charge additional monthly premium payments from enrollees if their costs are more expensive than the standard Medicare Part A and B programs. However, they have legal limits on their medical loss ratio, which effectively caps what percentage of their revenue they can use on administrative overhead.
They're legally required to offer at least the same benefits that Medicare does, so the doctors are wrong about that. Replacement plans can structure the cost-sharing differently, which may be what your doctors are referring to - for instance, they could charge higher copays or coinsurance for a particular service so long as it is offset by lower copays for a different service. However, they are legally capped on the out-of-pocket maximum they can charge each year, which is a benefit that traditional Medicare doesn't have.
posted by strangely stunted trees at 9:31 AM on November 30, 2018
They're legally required to offer at least the same benefits that Medicare does, so the doctors are wrong about that. Replacement plans can structure the cost-sharing differently, which may be what your doctors are referring to - for instance, they could charge higher copays or coinsurance for a particular service so long as it is offset by lower copays for a different service. However, they are legally capped on the out-of-pocket maximum they can charge each year, which is a benefit that traditional Medicare doesn't have.
posted by strangely stunted trees at 9:31 AM on November 30, 2018
The average doctor is not expert about how insurance or Medicare works. It's not in their training or in their day-to-day practice, but that doesn't stop some of them from having ill informed opinions or ideas.
NotMyselfRightNow is on target about how the financial arrangement between the government and Medicare replacement plans works (supplemental plans are different). The amount of money the insurance companies receive in this arrangement is determined by the characteristics of the group of patients (I.e., they get more money to care for sicker patients).
The insurance companies make money in this arrangement by keeping the cost of medical care less than the amount of money they get from the government. They do this through care coordination and management, prior authorization, and wellness programs.
It's not clear to me whether the doctors were saying that there's no money for anyone to have Medicare anymore (obviously not true; lots of people are on Medicare), or that full Medicare benefits aren't available to people on the replacement plans. Which is also not true - the plans are contractually required to offer the full range of standard Medicare benefits.
I wonder if they had to deal with some prior authorization issues with the replacement plans and feel salty about it? It's not surprising that one random doctor would have this skewed perspective, but it is surprising to hear of it in two different places.
posted by jeoc at 9:34 AM on November 30, 2018 [1 favorite]
NotMyselfRightNow is on target about how the financial arrangement between the government and Medicare replacement plans works (supplemental plans are different). The amount of money the insurance companies receive in this arrangement is determined by the characteristics of the group of patients (I.e., they get more money to care for sicker patients).
The insurance companies make money in this arrangement by keeping the cost of medical care less than the amount of money they get from the government. They do this through care coordination and management, prior authorization, and wellness programs.
It's not clear to me whether the doctors were saying that there's no money for anyone to have Medicare anymore (obviously not true; lots of people are on Medicare), or that full Medicare benefits aren't available to people on the replacement plans. Which is also not true - the plans are contractually required to offer the full range of standard Medicare benefits.
I wonder if they had to deal with some prior authorization issues with the replacement plans and feel salty about it? It's not surprising that one random doctor would have this skewed perspective, but it is surprising to hear of it in two different places.
posted by jeoc at 9:34 AM on November 30, 2018 [1 favorite]
Also, for what little it's worth, most Medicare replacement plans are actually structured as non-profits, so technically speaking, they can't make a profit - if they end up with more money than they started with, that's technically a surplus rather than a profit. That part's basically meaningless in the US medical world, though: I have seen non-profits engage in insanely financially predatory behavior on many occasions, and they just use the money to build out plush facilities and drive high executive compensation rather than paying it out to investors.
In the case of Medicare replacement plans it's completely the restriction on medical loss ratio, out-of-pocket maximums, and minimum benefit levels that keep the plan adminstrators in check, and not at all whether they're for-profit or not.
posted by strangely stunted trees at 9:40 AM on November 30, 2018
In the case of Medicare replacement plans it's completely the restriction on medical loss ratio, out-of-pocket maximums, and minimum benefit levels that keep the plan adminstrators in check, and not at all whether they're for-profit or not.
posted by strangely stunted trees at 9:40 AM on November 30, 2018
I hope it's ok to jump in here, because the OP dovetails with something that has been bugging me of late re:Medicare...
I guess we watch a lot of tv that is popular with seniors, because it's nothing but a flood of commercials for private insurance plans (or insurance brokers), and all of them seem to imply that going through them is the *ONLY* way one gets Medicare now. And, it also seems that, according to the ads, there's not a "basic Medicare" coverage that everyone gets automatically. They infer that you have to shop through hundreds of private plans now (and scare you with possibly not being able to see you regular doctor if you don't choose the right plan, etc.)
When my mom and father-in-law were still alive, they had basic Medicare, and then they each had a supplemental plan that covered a lot of what basic Medicare didn't (including the infamous "donut hole") It was all very understandable.
Is this not the way it works now?
posted by Thorzdad at 10:04 AM on November 30, 2018
I guess we watch a lot of tv that is popular with seniors, because it's nothing but a flood of commercials for private insurance plans (or insurance brokers), and all of them seem to imply that going through them is the *ONLY* way one gets Medicare now. And, it also seems that, according to the ads, there's not a "basic Medicare" coverage that everyone gets automatically. They infer that you have to shop through hundreds of private plans now (and scare you with possibly not being able to see you regular doctor if you don't choose the right plan, etc.)
When my mom and father-in-law were still alive, they had basic Medicare, and then they each had a supplemental plan that covered a lot of what basic Medicare didn't (including the infamous "donut hole") It was all very understandable.
Is this not the way it works now?
posted by Thorzdad at 10:04 AM on November 30, 2018
Nope, that's still how it works. You automatically get signed up for traditional Medicare Part A (primarily for hospital inpatient stays) and Part B (primarily for doctor's office visits and other outpatient services) when you turn 65, so long as you're drawing Social Security benefits before your 65th birthday, and if you don't sign up for a Medicare replacement plan instead. Sometimes you can elect to defer Medicare coverage altogether (or, more commonly, just defer Part B), for instance if you're still working and have employer-sponsored insurance.
If you're not drawing Social Security benefits when you turn 65, or you're eligible for Medicare before 65, like if you have a permanent disability or Black Lung, you have to sign up if you want traditional Part A and B benefits, but you sign up with Medicare, not a third-party insurer.
For prescription drug coverage, you do have to enroll with a third-party insurer, though: either through a standalone Medicare Part D plan, which just covers drugs, or through a Part C Medicare Advantage replacement plan that includes prescription drug coverage and replaces Parts A, B and D.
Supplemental or "Medigap" coverage still exists - you would buy it on top of Part A and B, and not if you elect Part C Medicare replacement. If you have a Part C plan, you would just buy up to a more expensive plan that has additional monthly premiums for more coverage, rather than buying supplemental Medigap coverage.
Isn't the US healthcare system fun, and not at all confusing and terrible?
posted by strangely stunted trees at 10:30 AM on November 30, 2018 [6 favorites]
If you're not drawing Social Security benefits when you turn 65, or you're eligible for Medicare before 65, like if you have a permanent disability or Black Lung, you have to sign up if you want traditional Part A and B benefits, but you sign up with Medicare, not a third-party insurer.
For prescription drug coverage, you do have to enroll with a third-party insurer, though: either through a standalone Medicare Part D plan, which just covers drugs, or through a Part C Medicare Advantage replacement plan that includes prescription drug coverage and replaces Parts A, B and D.
Supplemental or "Medigap" coverage still exists - you would buy it on top of Part A and B, and not if you elect Part C Medicare replacement. If you have a Part C plan, you would just buy up to a more expensive plan that has additional monthly premiums for more coverage, rather than buying supplemental Medigap coverage.
Isn't the US healthcare system fun, and not at all confusing and terrible?
posted by strangely stunted trees at 10:30 AM on November 30, 2018 [6 favorites]
The Part C plans, in my experience as a treating physician, are required to cover the same services, but insurers are able to build contracts with certain facilities and that is a way that they can shave some of the costs off. For example, I end up seeing a lot of patients with Humana Gold insurance, because that plan has a preferred contract with my office. I don’t know the nuts and bolts of the reimbursement, but my understanding is that our corporate offices like these contracts because they are a little more predictable in terms of actually getting paid for the services we offer.
That being said, those plans tend to be very restrictive with what/where they will cover things. They often tempt seniors by offering “extras” like dental coverage, gym memberships, transportation, etc. But it has been very difficult to find dentists that will take those insurances, because the reimbursement is so poor. Have had patients wait for weeks in the hospital to get inpatient rehab approved, some so long that they ended up giving up and just going home.
I still typically recommend straight Medicare A and B when my patients ask what they should do, FWIW.
posted by honeybee413 at 12:50 PM on November 30, 2018 [1 favorite]
That being said, those plans tend to be very restrictive with what/where they will cover things. They often tempt seniors by offering “extras” like dental coverage, gym memberships, transportation, etc. But it has been very difficult to find dentists that will take those insurances, because the reimbursement is so poor. Have had patients wait for weeks in the hospital to get inpatient rehab approved, some so long that they ended up giving up and just going home.
I still typically recommend straight Medicare A and B when my patients ask what they should do, FWIW.
posted by honeybee413 at 12:50 PM on November 30, 2018 [1 favorite]
Your question is a bit confusing. By "replacement plan" if you are referring to Medicare Advantage Plans, Part C plans as 'NotMyselfRightNow,' 'bassooner' and 'strangely stunted tree' referred to above, the plans are Medicare plans but are administered by private health care entities under government guidelines and review, "must provide the same level of care," but are capitated, they receive x amount of dollars to manage the patient's care so if they "manage" care properly, they make money, or do not manage properly, the lose money. Kaiser Senior Advantage plans are a prime example of this. They often focus more on preventative care and "efficiencies" than straight Medicare Part A and B.
If however, you were referring to Medigap policies or Medicare supplemental plans, plans that provide benefits additional to Medicare A&B, no, they are separate plans with their separate supplemental benefits to Medicare A&B provided by private insurance companies. Some of the more popular plans are Medicare Supplement Plans F, G, and N which you can research online, though CMS' 'Medicare and YOU' booklet - get it, it is indispensable for navigating signing up for Medicare, and I believe it mentions a few plans, or seek out a private insurance agent or AARP and similar organizations can assist with Medigap policies. Part D is another animal altogether...
Remember, the many Medicare Advantage providers focus on "efficiencies." If I weren't already in an employer/union plan as a spouse (remember the, is medicare or the employer primary rule, based on twenty employees or less), via one of the Advantage providers, I'd switch to straight Medicare A, B & D with a supplement 'F' or 'G' in a heart beat.
posted by WinstonJulia at 5:16 AM on December 1, 2018
If however, you were referring to Medigap policies or Medicare supplemental plans, plans that provide benefits additional to Medicare A&B, no, they are separate plans with their separate supplemental benefits to Medicare A&B provided by private insurance companies. Some of the more popular plans are Medicare Supplement Plans F, G, and N which you can research online, though CMS' 'Medicare and YOU' booklet - get it, it is indispensable for navigating signing up for Medicare, and I believe it mentions a few plans, or seek out a private insurance agent or AARP and similar organizations can assist with Medigap policies. Part D is another animal altogether...
Remember, the many Medicare Advantage providers focus on "efficiencies." If I weren't already in an employer/union plan as a spouse (remember the, is medicare or the employer primary rule, based on twenty employees or less), via one of the Advantage providers, I'd switch to straight Medicare A, B & D with a supplement 'F' or 'G' in a heart beat.
posted by WinstonJulia at 5:16 AM on December 1, 2018
This thread is closed to new comments.
And that's why the dozens of "tailored" plans may provide acupuncture or viagra, but if someone needs the care of full Medicare, it's not available anymore because there isn't enough money and the replacement plans can't and won't cover it. Is this true?
Not even remotely. Last I saw, 70% of seniors are on basic Medicare.
posted by NotMyselfRightNow at 9:13 AM on November 30, 2018