If we used football scoring totrack the progress of healthcare reform, this would be themoment to declare: Touchdown €¦Advantage
!Obamacare opponents have been warning for several years nowthat Medicare Advantage, the private plan option, that seniorscan pick instead of traditional fee-for-service Medicare, wouldfail because of the healthcare law's impact on the program. Theprediction was that the gradual elimination of extra federalreimbursements to Medicare Advantage would kill it.But the opposite is happening.Advantage plans, which combine Part A (hospitalization) PartB (outpatient services) and usually Part D (prescription drugs),are on a big-time roll. Enrollment has jumped an impressive 10percent in each of the past three years, according to datacompiled by the Kaiser Family Foundation (KFF), a non-profithealthcare research and policy organization. About 28 percent ofall Medicare enrollees this year are in an Advantage plan."The growth is remarkable, and no one anticipated it," saysDan Mendelson, chief executive officer of Avalere Health, ahealthcare consulting and research firm. "Advantage plans willbe over 40 percent of the market soon."The growth of Advantage likely will shift into an evenhigher gear during the next few years following the launch ofthe state public insurance exchanges under the Affordable CareAct (ACA). Most are managed care plans - 65 percent are healthmaintenance organizations (HMOs) and 22 percent are preferredprovider organizations (PPOs), according to KFF. Many of the topplayers in Advantage also will be marketing insurance in theexchanges and they will have ample opportunity to cross-marketAdvantage plans to older users of exchange products as theytransition to Medicare.Savings on premium costs are a big driver of Advantage plangrowth. Enrollees pay their regular Part B premium, whichis$104.90 this year. The Advantage plans also can charge asupplemental premium, but many don't. This year, 55 percent ofenrollees are in plans with no extra premium, and two-thirds ofHMO Advantage plan members pay nothing extra, KFF says.That means Advantage participants do not pay standalonepremiums for prescription drug coverage, averaging $30 per monththis year. They also are not paying for Medigap supplementalplans, which are popular in traditional Medicare and coverdeductibles and coinsurance for long hospital stays andoutpatient services, and help lower out-of-pocket costs.Prices vary, but it's not uncommon to find monthly Medigappremiums around $200. (Medigap is not sold with Advantageplans.)NO FEAR OF MANAGED CARE
Advantage plans also are gaining because the baby boomerscoming into the Medicare system are accustomed to managed care."The next generation of Medicare enrollees were in theworkplace during the managed care revolution of the 1990s, sothey're more used to care networks and rules," says Joe Baker,president of the Center for Medicare Rights, a non-profitconsumer service organization.Mendelson takes that one step further, arguing that seniorsare losing patience with traditional fee-for-service healthcare."Our survey work shows a growing level of frustration withthe fee-for-service approach," he said. "Patients see a systemthat lacks coordination of care and quality metrics. They sensethat doctors have less and less time to take care of patients." Under Obamacare, fee-for-service providers are encouraged toband together into Accountable Care Organizations (ACOs), whichaim to coordinate care. But ACOs still are in the experimentalstage.So the rapid growth of Advantage leaves an open question: Isa private managed care plan good for everyone on Medicare?The savings on premiums are an important plus for healthyseniors, since their overall usage of care will be low andout-of-pocket costs will be minimal. Baker urges less-healthyseniors to proceed with caution."If you're a relatively healthy 65-year-old who goes to thedoctor once a year, you will save some money on premiums," Bakersays. "But costs can escalate if you get sick."That's because Advantage plan members have exposure topotentially high out-of-pocket costs if they use a lot ofhealthcare. Federal regulation caps their annual out-of-pocketspending at $6,700, although most plans cap cost-sharing at muchlower levels. The average out-of-pocket cap in Advantage plansthis year is $4,317 and half of enrollees are in plans capped ator below $3,900, KFF reports.Traditional Medicare, by contrast, has no cap, but if youhave Medigap, many out-of-pocket charges such as copays arecovered.Choosing between Advantage and traditional Medicare boilsdown to a bet on your health prospects when you first enroll inthe program, usually at age 65. You also can switch betweenfee-for-service and Advantage during Medicare's annual fallenrollment period.If you are inclined to take traditional Medicare
, there isan advantage to picking it when you first enroll because theMedigap policy won't be able to exclude you for any pre-existingcondition or charge a higher premium due to any past health
problems. Depending on your state, you might have troublegetting a Medigap policy, or have to pay more, if you try to geta policy past that point.And what about those reimbursement cuts? Before the ACA,Medicare Advantage plans were reimbursed by the federalgovernment
at 114 percent of regular Medicare rates, a paymentscheme
that was put in place to stimulate the Advantage market.The ACA reduces them by $116 billion over a period of years,ultimately equalizing reimbursements with traditional Medicare. Written by Mark Hermiller, broker at Humble & Davenport, and owner of Peak Advisors.