Terry’s Columns Advantage Crunch Arrives

Advantage Crunch Arrives

By Terry Savage on January 29, 2024

Medicare Advantage is causing huge losses for insurers like Humana, which recently reported a surprising loss, attributed to higher spending in Advantage plans than anticipated. The company’s stock immediately fell 22% on the news, as the company disclosed their earnings would likely be less than half what had been widely expected.

Other Medicare Advantage insurers – United Health Group and CVS Health – saw stock declines as the narrowing profit margins are causing a squeeze because of more spending on care for their Advantage patients. Humana forecast the losses continuing through 2025.

And that should scare you – IF you are in an Advantage plan.

Think about it logically. Where will the insurers turn to recoup those margins? Most likely by raising costs for enrollees or by cutting services. And that will affect your care and your costs down the road. Not so far down the road.

I’ve written about the disadvantages of Advantage plans before. But this is not just a reminder; it’s an opportunity.

There is a little-discussed Open Enrollment period for Medicare Advantage enrollees that lasts until March 31st. Until then, you can switch back to traditional Medicare and purchase your supplement. Even the lowest cost supplement might be better for your future healthcare prospects.

Alternatively, Advantage insurers could bill the government more. In fact, they’ve already been doing that. By designating some patients as “sicker” than they really are, the insurer gets a larger fixed payment to spend on care. Medicare reimbursement per enrollee is based on an average cost per enrollee. But the insurer can “upcode” the health level of their participants –making them sicker than they actually are — to gain higher reimbursement even though insurers may provide no more care to those patients.

The non-partisan independent commission that oversees Medicare Advantage payments, MedPAC, projects $88 billion in overpayments to insurers in 2024 as a result of this scheme. And the Committee for a Responsible Federal Budget forecasts that Medicare Advantage overpayments to insurers could be as much as $1.56 trillion between 2023 and 2033.

How do the insurers get away with “over-billing” the government? According to Diane Archer of Just Care, USA, “this allows insurers to game the system and claim their enrollees are less healthy than they actually are to generate greater revenues. And, because the government pays the insurers upfront, regardless of what they spend on care, it incentivizes the insurers to inappropriately deny care and delay care in order to maximize profits.”

Even worse, as Advantage programs overbill the government, it undermines the basic financial problems of original Medicare and its sustainability for all of us.

Betting on Your Health or Switching Back
I’ve written in the past about the care restrictions and prior authorizations required in Advantage plans. It has been a disturbing trend.

Yes, some Advantage plans have provided superior results with very low enrollee costs, but the information is not available to tell you which these are. But the plans being sold in television commercials advertising low premiums very well might not deliver the coverage you need when you most need it. They work just fine while you are well and don’t need a lot of care.

Already 51% of Americans have given up the traditional Medicare and supplement insurance and switched to Advantage. The big Medicare Advantage insurers are public companies. What do you think they’ll do next to increase profits?

If you do want to switch back to original Medicare before March 31st, it’s important to follow these steps. First check to make sure you can get Medicare supplemental insurance to fill coverage gaps (“Medigap”). You can do that at Medicare.gov where it’s easy to compare Medigap options offered in your area. Choose one, and then contact the company letting them know you are switching out of Advantage and confirming your eligibility (based on health).

Then, let your Medicare Advantage plan know that you are disenrolling. You will automatically be enrolled in Traditional Medicare. You can confirm your enrollment with Medicare by calling 1-800-633-4227. You can also sign up for Medicare Part D prescription drug coverage at Medicare.gov. Contact your state health insurance assistance program or SHIP for free assistance.

Remember that even the supplement plans with lesser coverage and lower costs guarantee you the right to see any physician or hospital that accepts Medicare and allow them to decide immediately what treatments are necessary, as opposed to an AI calculator designed to authorize treatments based on profit margins.
And that’s The Savage Truth



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