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Open enrollment for Medicare Advantage, a privately-run option of the federal government’s public healthcare program, is ending Dec. 7.
The private option has gained popularity in recent years as companies spend massively on advertising and tout benefits like vision and dental insurance. This year, Medicare Advantage could surpass the traditional Medicare option in enrollment.
But while insurers say consumers get a better deal with Advantage plans, there’s growing criticism that these plans aren’t all they’re cracked up to be.
For more on this, Marketplace’s David Brancaccio spoke with Dr. Fred Hyde, an independent consultant in healthcare finance and an adjunct associate professor at the Georgetown University School of Health and School of Nursing. The following is an edited transcript of their conversation.
David Brancaccio: Medicare, government run, but somehow it’s getting more private sector all the time. I guess a lot of people can’t escape the ads they’re getting this time of year. All these advertisements for this other thing, Medicare Advantage. What is that?
Fred Hyde: Medicare Advantage is, simply put, bringing managed care to Medicare. It’s the privatization, if you will, of the Medicare program.
Brancaccio: If you believe the ads, there is an advantage in Medicare Advantage. I know you’re not here to sell the private-sector plans, but why might someone be interested in the Advantage plans?
Hyde: Well, you’re correct. A good number of people are interested. Medicare beneficiaries are almost evenly divided now between traditional or original Medicare and those who have enrolled and one or more of the 4,000 or so Medicare Advantage plans that we have in the nation. So clearly, some people have seen an advantage. The main advantage will be short-term economic avoidance of pain, if you will. The American health care system is sufficiently complex and expensive that anytime we can avoid unnecessary economic pain, we should do so. So that’s the main advantage, that the Medicare Advantage program caps out-of-pocket limits, it can reduce premiums, it can reduce or eliminate co-payments and deductibles. All of these features will vary from one MA — and I’ll use that, if I may, short acronym for Medicare Advantage — they’ll vary from one plan to another, but the Medicare beneficiary will generally end up in the short term paying less.
Brancaccio: And there might be some other nifty advantages, like dental and vision care, gyms.
Hyde: Yes, the plans have been more creative and innovative than traditional Medicare in offering relatively lower-cost services that are of interest to seniors, especially when they’re in the 65 to, say, 75 age group and not beyond. The advantages are flexibility, some additional benefits, limitations on your out-of-pocket expenses.
Brancaccio: But in your view, there is a key crucial question that people need to ask themselves, or at least an issue that they need to be aware of, if they’re considering Medicare Advantage.
Hyde: That’s correct. There are actually two things that played into my own selection — I’m original or traditional Medicare for these reasons. One of the weaknesses is what is referred to as a limited network. Is your doctor in this network? Is your hospital in this network? That’s a very large issue. And we have a $4 trillion industry in health care in this country, and nobody has a directory of the physicians who are in Medicare Advantage right now. So the plans themselves have to be more conscientious than they have been because the experience of many consumers is that the directories the plans offer are not altogether reliable. Now, here’s the second problem — this is a big one: There is a Medicare Advantage managed-care tactic called “prior authorization.” Prior authorization is simply what what it sounds like, your doctor thinks you need this test. But your doctor’s word is not good enough. The Medicare Advantage plan has to have someone who is generally not a doctor, who is generally just checking a box and at an 800 number, decide whether or not you need that test. What-the-heck kind of plan is that?
Brancaccio: Fred, there’s this concept in economics called, it’s got a horrible name, it’s called “hyperbolic discounting.” It’s essentially the difficulty that we humans have in thinking about things in the medium to distant future. We’re better at knowing, for instance, what kind of health care bills we want to pay tomorrow and next month, not so good six months or five years from now. That’s part of the issue here, right? Medicare Advantage can look good now and soon, but could be a challenge in the distant future that we don’t see too clearly.
Hyde: Well, that’s exactly right. Our inability to anticipate what our needs are going to be becomes a Medicare Advantage issue, because once you’re in a Medicare Advantage plan, it’s somewhat difficult to get out. It’s not the, you know, Hotel California, if you will, because there is an open period. But you need to exercise your own bureaucratic skills in extricating yourself from a Medicare Advantage plan once you’re in it. Why you have to be very careful in selection, the absence of a national directory and the absence of standardization of policies really add up to a lack of transparency in the product you’re buying. In some ways, the dental, the eye care, the rest of this stuff, if you’re faced with a fatal disease, or have a sudden heart attack, or have a traumatic injury, you’re not going to care very much about whether or not they capped your teeth back in, you know, three or four years ago. So needs are going to change, the capacity that you have to do broken-field running and leave this plan and go to that plan is limited. It’s there, but it’s limited.
Brancaccio: Now, I’m hearing you saying that you’re not telling people which way to go on this, but you would like it to be an informed decision.
Hyde: It’s absolutely right. It would be extraordinarily presumptuous for anybody to tell another eligible senior or someone thinking about this decision, which way to go, because it’s going to be right or not right for some people. I’ll just give you an example. In traditional Medicare, your monthly premium’s $164.90 next year. So the money out of pocket may be more important right now to some, perhaps many, people. The choice of doctor, hospital, escaping the bureaucratic limitations, whatever they might be down the road may be important at a different point in life of the same people. Part of the problem, big part of the problem — and this is why this kind of program, no matter which way people end up making a decision, is valuable — because seniors are vulnerable. People who contemplate their own morbidity and mortality are not always, you know, working on eight cylinders.
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