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February 02, 2015 at 04:02 AM
A majority of seniors who enrolled in Medicare Advantage between 2006 and 2011 actually switched from traditional Medicare, a change most common among 65- to 69-year olds, according to a recent study by the Kaiser Family Foundation. And, while the same study showed that the percentage of people making the switch has steadily dropped since 2006, the Centers for Medicare and Medicaid services reported all-time-high Medicare Advantage enrollment in 2014.
Why are Advantage plans so popular among both traditional Medicare beneficiaries and new enrollees? “On paper many of the benefits are intriguing because of the low or zero monthly premiums, and members get extra benefits such as eye glasses, hearing aids and prescription drugs,” said Randy Frey, FNA Insurance Services vice president. “Since Medicare is paying so much of the cost of Medicare Advantage, in general terms it’s less expensive for MA members to have their plans than to cover their gaps with a Medicare supplement.” Advantage plans also have an out-of-pocket maximum of $6,700 per year, while traditional Medicare has no cap at all, he said.
Those perks can be deceiving, however, and Advantage enrollees often find themselves with unexpectedly high out-of-pocket costs once they face serious medical conditions. “They usually have no idea they’re in closed networks [HMOs] of doctors and hospitals,” said Jim Merklinghaus of JBM Financial. “Advantage plans are attractive from the onset, but once customers need coverage, they’re often disappointed.”
According to a Kaiser Family Foundation review of access to care under private and traditional Medicare plans, HMOs usually perform better at providing preventive services, while traditional Medicare does a better job for beneficiaries who are already sick. Because of this discrepancy, Advantage customers who need out-of-network care may end up with far higher overall healthcare costs than if they had enrolled in the more inclusive traditional Medicare in the first place.
It can also be tough for enrollees to get out of Medicare Advantage once they realize these disadvantages. “I’ve spoken to too many people over the years who wanted to dis-enroll once they got bad medical news and needed a larger network,” said Frey. “Now, unless you move out of your service area or go back to a group employer plan, there are very few reasons to be able to dis-enroll outside the special disenrollment or annual election periods.” While those opportunities do come around each year, the months in between can mean far higher medical bills for MA customers who require out-of-network care.
