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Andrew Smith

Andrew Smith

Is Medicare Advantage worth the short-term savings?

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The final day to enroll in Medicare is December 7. Tens of millions of Americans will opt for either the federally-run conventional plan or the privately-run Medicare Advantage program.

As businesses have increased their marketing budgets and highlighted perks like vision and dental insurance, the private option has become more appealing to employees. Medicare Advantage may have more enrollees than conventional Medicare this year.

Although insurers claim that consumers benefit more from Advantage plans, there is mounting evidence to suggest that this is not the case.

Dr. Fred Hyde, an independent consultant in healthcare finance and a professor at Georgetown University’s School of Health and School of Nursing, was interviewed by Marketplace’s David Brancaccio for further information. A lightly modified version of their chat is provided below.

A Response to David Brancaccio Although Medicare is a government program, it increasingly mirrors the private sector in its structure and administration. It’s the time of year when commercials seem to be everywhere you go. There are constant reminders of Medicare Advantage marketing. Exactly what is that, you ask?

To quote Fred Hyde: Simply described, Medicare Advantage is the introduction of managed care to the Medicare program. It can be thought of as Medicare’s “privatization.”

Brancaccio: The advertisements would have you believe that Medicare Advantage has some sort of benefit. I understand that your purpose here is not to drum up business for the private plans, but could you perhaps explain to me why someone might be interested in the Advantage plans?

Hyde: Okay, you’re right. Many folks seem enthusiastic about this. Approximately the same number of people are enrolled in original Medicare as are enrolled in one of the roughly 4,000 Medicare Advantage plans available across the country. Some people have found a use for it. For the economy, the major benefit will be a reprieve from hardship. Due to the high cost and high complexity of the American healthcare system, it is important to minimize waste whenever possible. The primary benefit is that premiums and out-of-pocket costs (from things like co-pays and deductibles) may be lowered or even eliminated by participation in the Medicare Advantage program. While the specifics of each Medicare Advantage (or “MA,” if I may use the abbreviation) plan will vary, the average Medicare recipient can expect lower out-of-pocket costs in the short run.

Brancaccio: And perhaps some other cool benefits, like dental and vision care, gyms.

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Hyde: Plans have been more innovative and creative than standard Medicare at providing lower-priced services of appeal to seniors, particularly when those seniors are between the ages of 65 and 75. The upsides are adaptability, more benefits, and lower out-of-pocket costs.

Brancaccio: Still, you think there’s a major question folks should ask or at least an issue they should be aware of if they’re thinking about Medicare Advantage?

Hyde: Yes, you are correct in saying that. Two main factors led me to choose original, or classic, Medicare. The term “limited network” describes one of the flaws. Are you able to see your doctor if they participate in this system? Can you tell me if your medical center is part of this group? That’s a major problem. In addition, the healthcare business in the United States is worth $4 trillion, however, there is currently no database of Medicare Advantage doctors. Because many customers have found that the directories the plans provide are not entirely dependable, the plans themselves need to be more careful than they have been. Next, we come to a much larger issue: Prior authorization is a method used by Medicare Advantage health plans to save costs. Prior authorization means that your doctor has already decided that you need to undergo this examination. However, your doctor’s word is not sufficient. When you sign up for a Medicare Advantage plan, you’ll have to have someone who isn’t a doctor—someone who is usually just checking a box and calling an 800 number—decide if you need the test. And what the heck kind of a strategy is that, anyway?

Brancaccio: Fred, in economics there’s this horrible-sounding notion known as “hyperbolic discounting.” It’s the trouble we humans have envisioning the not-too-distant future. When it comes to healthcare costs, for example, we have a clearer idea of what we’d be willing to spend tomorrow and next month, but a far less clear picture of what we’d be willing to pay in six months or five years. That’s a bit of a problem, huh? While Medicare Advantage may appear promising shortly, it may pose some difficulties in the not-so-distant future.

Hyde: That’s a very good point. Medicare Advantage becomes problematic for us since we can’t predict our future medical needs, and it’s not easy to switch to a different plan once you’ve enrolled in Medicare Advantage. Due to the absence of a closing curtain, this is not the “Hotel California.” Once enrolled in a Medicare Advantage plan, however, you will need to use your bureaucratic savvy to get out of it. There is little to no transparency in the goods you are purchasing due to the lack of a national directory and the lack of standardization of policies, therefore you must exercise extreme caution while making your choice. If you’re facing a terminal sickness, a sudden heart attack, or a catastrophic injury, likely, you won’t give much thought to the fact that it’s been three or four years since you had your teeth capped. As a result, requirements may shift, and the ability to swiftly abandon one strategy in favor of another may be in short supply. Availability is restricted but not nonexistent.

Brancaccio: Now I hear you saying that you’re not trying to persuade people to take a certain stance on this issue, but you do want them to make an educated choice.

Hyde: I agree, it makes perfect sense. Given that this choice will be appropriate or inappropriate for certain people, it would be extremely presumptuous for anyone to tell another eligible senior or someone considering this decision which way to go. Let me just give you an illustration. Your 2019 monthly premium for Original Medicare will be $164.90. Therefore, for some, possibly many people, the cash in hand is currently more crucial. At a later time in their lives, the same people may place a premium on having the freedom to choose their doctor or hospital and avoid bureaucratic restrictions. This kind of initiative is beneficial regardless of how people ultimately vote because seniors are particularly susceptible to exploitation. Those who regularly engage in morbid thought are not necessarily, you know, firing on all cylinders.

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Is Medicare Advantage worth the short-term savings?

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