Original Medicare (Part A and Part B) cover a lot but they do not cover everything. That’s why you may want to consider looking at Medicare Advantage plans.
Rising Medicare Costs
The “baby boom” increased the number of people born between 1946 and 1964. As many as 10,000 baby boomers become eligible for Medicare every day and will continue do so through 2030. With more and more people eligible for Medicare, more dollars are spent on care than are coming into the system by way of taxes.
According to the 2021 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, the Medical Trust Fund will be insolvent through 2026. This does NOT mean it is going bankrupt. It means that there will not be enough Medicare funding to cover 100% of the care it does today. In fact, estimates say it will cover only 91%.
If changes are not made to increase how much money is coming in or to decrease how much money is spent, the Medicare you know today will not exist in the near future.
Privatization of Medicare
The federal government hoped to drive down costs by privatizing Medicare, at least part of it. That’s why the Balanced Budget Act of 1997 signed Medicare+Choice into law. They renamed Medicare+Choice to Medicare Advantage in 2003.
The law allowed private insurance companies to sign contracts with the U.S. government that let them offer you Medicare Advantage plans. By signing those contracts, these companies agree to cover everything that Part A and Part B do. They get a fixed dollar amount from the government for each person they cover. They could do what they wanted with that money but they had to meet quality standards for care and service. Since plans can also receive quality bonuses, it is not in their best interest to limit care or deny too many services.
How the Government Benefits
The goal was to slow down spending from the Medicare Trust Fund so that the program would last as long as possible. In theory, Medicare would pay less to an insurance company than they would if a beneficiary needed expensive healthcare services, like a hospital stay. It didn’t work out as expected. The government paid more to insurance companies than they would have paid on actual care until 2017. That’s two decades of overspending! Now, it seems that payments are more in balance. Still, the government hasn’t really seen any significant savings from the venture.
How the Insurance Companies Benefit
Insurance companies benefit in a number of ways. They get access to a larger population than they would have had otherwise. These Medicare Advantage plans also receive guaranteed monthly payments from the government and they get to keep that money even if the beneficiary uses no services. Add to that any premiums that people pay them directly for one of their plans. It is a relatively easy way for them to drive in profits.
How You Benefit
You continue to pay your Part B premiums to the federal government and, depending on the plan you choose, you could also pay an additional premium to the insurance company. The good news is that as many as 59% of Medicare Advantage plans did NOT have a monthly premium (other than the Part B premium) in 2022. Also, you could get more services covered than you get with Part A and Part B alone.
Supplemental Benefits
The real meat of Medicare Advantage plans are the extra benefits that Original Medicare does not cover. These are referred to as supplemental benefits.
More and more services have been offered over the years, ranging from dental coverage to hearing and vision benefits. Some plans even offer gym memberships and adult day care services. Others cover over-the-counter drugs and still others transportation to medical appointments. You could get wheelchair ramps and home modifications like widening of doorways to adapt your home for any disabilities. Pest control services could be covered for people with allergies or respiratory conditions. Likewise, these plans could pay toward carpet cleaning or air filters. Keep in mind these plans are not required to offer these benefits. They are optional. These plans may offer none, some, or all of these services.
You could also get prescription drug coverage with a Medicare Advantage plan. As many as 89% of these plans included drug coverage in 2022. It could be more convenient to have all your healthcare and drug benefits under one umbrella. Depending on the plan, it could also decrease the number of monthly premiums you have to pay, i.e., you would not need to sign up for a separate Part D plan.
Too Good to be True?
Medicare Advantage plans may sound too good to be true. Depending on your situation, they could be.
I have had people refer to Part C plans as “Cadillac” plans because they can potentially offer so much more in benefits. However, I have also had people call them Medicare “Disadvantage” plans because the insurers tend to make you go through more hoops in the way of prior authorizations.
An even bigger issue is the network coverage. All Medicare Advantage plans run on a local network of healthcare providers and facilities. If you get care outside of that network for any reason, you could pay significantly more or have coverage denied altogether. This could especially be a sticky issue for someone who likes to travel. Original Medicare may be a better fit. In that case, you can get care anywhere in the country from any healthcare provider or facility that accepts Medicare.
References
THE BOARDS OF TRUSTEES, FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS. (2021). THE 2021 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS. CMS.gov. https://www.cms.gov/files/document/2021-medicare-trustees-report.pdf
Medicare Advantage 2022 Spotlight: First Look. (2021). KFF. https://www.kff.org/medicare/issue-brief/medicare-advantage-2022-spotlight-first-look/
Medicare Advantage Plans Offering Expanded Supplemental Benefits: A Look at Availability and Enrollment. (2021). Commonwealthfund.org. https://doi.org/https://doi.org/10.26099/345k-kc32
Report to the Congress: Medicare Payment Policy — Chapter 13: The Medicare Advantage Program: Status Report. (2018). MedPAC.gov. https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar18_medpac_ch13_sec.pdf
U.S. Census Bureau. (2022). 2020 Census Will Help Policymakers Prepare for the Incoming Wave of Aging Boomers. Census.gov. https://www.census.gov/library/stories/2019/12/by-2030-all-baby-boomers-will-be-age-65-or-older.html
U.S. Congress. (1997). Public Law 105 – 33 – Balanced Budget Act of 1997. Government Printing Office. https://www.govinfo.gov/app/details/PLAW-105publ33
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