Medicare Advantage(s) the Insurer, Not the Insured

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The Kaiser Family Foundation recently wrote a summary of what you actually get when you enroll in a Medicare Advantage (Part C) program.

Over the last few years, enrollment in Medicare Advantage has grown significantly; nearly half of Medicare beneficiaries now belong to one of the 43 plans available. Why not? The lure of a ‘free lunch,” even with restrictions on your physicians and hospitals, is tough to ignore.


There are the sure winners; who wouldn’t want additional vision, hearing, fitness, dental coverage, or remote access (a new phrase for telemedicine)?

Not quite as many beneficiaries look and find meals and funds for over-the-counter medical items

But look at the ones where few benefits are available. In-home support and a related category, bathroom safety (provision of grab bars in the shower, toilet accommodation for wheelchairs, same as the two related categories of telemonitoring and caregiver support. All of these promote in-home care, which is often better and is undoubtedly less expensive than sub-acute institutionalization or no care at all. Why not help out there and let beneficiaries pay for their fitness program?

“Both Humana and Blue Cross Blue Shield have increased the share of plans offering in-home support services (from 4% of plans in 2022 to 11% of plans in 2023 for Humana; from 20% of plans in 2022 to 27% of plans in 2023 for Blue Cross Blue Shield). Cigna is offering caregiver support services in 17 percent of plans after not offering this benefit in any individual plans open for general enrollment in 2022.”

The Largess of Health Insurers?

“Historically, one goal of the Medicare Advantage program was to leverage the efficiencies of managed care to reduce Medicare spending. However, the program has never generated savings relative to traditional Medicare. In fact, the opposite is true.”


Who pays for these extras? Is it somehow the organizational efficiency of private enterprise compared to government payments? My free-market friend would support that position, but the reality is different. Medicare Advantage costs the Medicare program $321 more per beneficiary than traditional Medicare. The largesse comes from taxpayers and the beneficiaries of traditional Medicare, who need to make larger payments. The halo of goodness, along with a percentage of the payments [1], goes to the health insurers.

For fans of big numbers, that is $7 billion in additional spending in 2019. And based on the continued growth of Medicare Advantage, half of the projected increases for Medicare will be to these beneficiaries.

And one final note. Medicare Advantage is far more effective and efficient in gaming the system than CMS is in policing it. Here is just another in a series of articles demonstrating how Medicare Advantage programs up-code the severity of illness of its beneficiaries to reap significantly greater payments. The percentage of up-coded cases approaches 20% in some samples; this is both a significant amount and a clear indication of intent. Of course, giving back these fraudulently acquired monies would be a “hardship” for the insurers, and besides, they happened years ago.

[1] Profits by the insurers for these plans are capped at anywhere between 15 and 20% of payments. That is a very significant margin. That margin is dramatically increased when you provide more services with little additional organizational costs.

Source: Extra Benefits Offered by Medicare Advantage Firms Vary