Changes Coming to Medicare Advantage Plans

The Medicare Advantage plans have been one of the more popular innovations in Medicare. Enrollment is up to 10.5 million, from only 5.4 million in 2005. But these plans will see some changes later this year, and that could increase costs or decrease benefits for enrollees.

Traditional Medicare is a fee for service program that covers hospitalization and some basic medical services. But it also has deductibles, copayments, and gaps. Enrollees in traditional Medicare must decide whether to purchase a supplemental policy to cover the gaps or cover those costs themselves.

Medicare Advantage plans package hospitalization and physician services in one plan. Advantage plans also generally cover care that is excluded from traditional Medicare, such as vision, prescription drugs, dental, and other services. Advantage plans tend to manage care and emphasize preventive care. There are different types of Advantage plans. The most common types of plans are health maintenance organizations and private fee for service plans.

Advantage plan sponsors receive higher reim-bursements than traditional Medicare providers. Govern-ment leaders believe the higher reimbursements are unwarranted and are planning to reduce them. The cuts, to be announced later this year and take effect for 2010, will reduce payments to Medicare Advantage plans by up to 5%.

Sponsors of Advantage plans can respond in several ways.

? They could absorb the cuts, reducing their profits.

? Monthly premiums and other charges could be increased.

? Benefits could be decreased through copayments, deductibles, or excluded coverage.

? Care management or prevention programs might be increased.

? Patients might require additional approval before receiving some treatment or tests.

If the sponsors increase premiums or reduce benefits, this is estimated to cost enrollees from $40 to $70 per month. Sponsors will submit their proposals to the government by June 1, and the government will review the proposals before approving them or requiring changes. Enrollees might not learn specific changes until sometime this fall.

Enrollees in rural areas are most likely to be affected. There already is little competition in those areas. The government wants to eliminate plans with 10 or fewer enrollees. Estimates are the elimination of such plans will affect less than 1% of enrollees, though it would eliminate 27% of all Advantage plans.

All the changes in Medicare Advantage plans won’t be bad. New rules will impose different marketing standards, making it easier to compare plans. There also will be limits on maximum out-of-pocket expenses of members and a requirement that costs and other terms be explained in easy-to-understand language. Plans that do not limit out-of-pocket expenses of enrollees to $3,400 or less will be reviewed and probably asked to reduce the costs.

The government also says it will closely review details of plans and their cost disclosures. The type of plan must be clear in its name. Drug coverage must list details such as whether prior authorization is required or generics or other lower cost drugs must be tried before brand name drugs will be covered.

Advantage plans will have to accept all patients who enroll through the Medicare web site and will have to resolve urgent complaints within two days.

The potential for higher costs and other changes do not mean you should abandon Medicare Advantage next year. After any premium increases or benefit reductions, Advantage plans still should be better deals than traditional Medicare.

In addition, reimbursements to physicians under regular Medicare continue to decline more sharply than Advantage reimbursements. Many doctors are dropping out of Medicare or refusing to take new Medicare patients. One survey reported that 28% of Medicare beneficiaries looking for a primary care physician had trouble finding one.

There will be a number of changes in Medicare in 2010. You will have a chance to review the changes and choose a Medicare Advantage plan during the enrollment period later this year. The choices in your area will be on the Medicare web site for your review at www.medicare.gov. Even if you are satisfied with your plan, spend some time later this year reviewing the options so you can make the best choice for you.

RW June 2009.