Will Medicare Advantage Survive?

Medicare Advantage Reductions
Click the photo to read Karen Ignagni’s (President of America’s Health Insurance Plans) statement to congress.

Recently I have gotten mixed signals about Medicare Advantage.  The negative misinformation about what happened to Advantage in Obamacare is so loud that the whispers of fact cannot be heard.

Both Aetna and Cigna have acquired smaller insurance companies to be able to offer Medicare Advantage plans in the future.  Clearly, there is a way for insurance companies who offer Advantage plans to make money in the future.  Businesses do not spend billions of dollars on something that is obsolete.

While they are adding Medicare Advantage options for the future, America’s Health Insurance Plans are telling the House of Representatives; Ways and Means Committee how the Obamacare cuts to Medicare Advantage are hurting the insurance industry.

Last week I read the Patients Protection and Affordable Care Act again.  I wanted to know why insurance companies were expanding their exposure to Medicare Advantage if the future is so bleak.  I learned something important.

Obamacare restructures the payment process for Medicare Advantage.  The days of insurance companies getting paid more than the average cost of Medicare per patient are over.  There is now a competitive process for Medicare Advantage plans.

Those Advantage plans that are in the bottom 40% will only be paid by the federal government what is necessary to pay for the Medicare treatment that their members receive.  The top 60% of Medicare Advantage plans will participate in a bonus structure.

HHS has developed a rating system.  Medicare Advantage plans will receive a rating of 1-5, with 5 being the best.  Those plans that earn a score of 3 or better will receive bonus payments in addition to their “benchmark” payment.

Yesterday was the first day of Medicare’s Annual Enrollment Period.  People who are enrolled in Medicare have the option to join or change their elections for both Medicare Advantage and Medicare D (Prescription Drug Plans.)

As you review your Medicare Advantage options, every Advantage plan is required to have their HHS rating somewhere in their enrollment materials.   You will be able to see how your plan rates in the eyes of the federal government.

There are two things to keep in mind as you review your Medicare Advantage plan’s rating.

  1. The rating bonuses will not be paid for a couple of years.  The rating your plan has now is meaningless as far as how your insurance company is paid.  What matters is what their rating is in the future when the bonus program begins.
  2. The rating systems are a national comparison.  Advantage plans are different throughout the U.S.  It is likely that there are no 5 star or even 4 star plans operating in your area.  Rather than relying solely on a rating system designed to determine how much an insurance company will be paid, make your decision about an Advantage plan based on the benefits it offers in your community.

If you want to make a change to your Medicare Advantage or Medicare D (PDP) plan, you need to contact your insurance agent directly.  He is not allowed to call you based on a referral from your children or friends.