When Medicare began, the program copied the popular Blue Cross insurance plan. So for a while, seniors and non-seniors had basically the same health insurance. But since one plan was controlled by the marketplace and the other by politicians, the two plans diverged over time. Practically all of the structural problems of Medicare stem from this divergence.
Seniors are the only people in our society who must buy a second health plan (Medigap) to fill in holes in their primary plan (Medicare). Also, millions of seniors are paying a third premium to a third plan (Medicare Part D) to get the drug coverage non-seniors have. Even then, many face "donut hole" gaps that no one else faces.
Paying three premiums to three plans is extremely wasteful. In fact, two studies by Milliman & Robertson showed that if Medicare and Medigap funds alone were combined, seniors could have the same coverage non-seniors have – at least in principle.
This is where Medicare Advantage plans come in. They offer seniors comprehensive coverage, comparable to what the rest of America has.
In the early years, health economist Ken Thorpe found that these plans attracted low- and moderate-income seniors who did not have Medigap coverage. In return for a premium of about $250 a year or less, these enrollees got $1,034 worth of extra benefits, including drug coverage. A social problem solved, at minimal cost to taxpayers.
With the introduction of (subsidized) Part D coverage, this trend has continued. Medicare administrators report that:
- 86% of Medicare beneficiaries have the opportunity to join a Medicare Advantage plan with no premium charged for drug coverage.
- In addition to free drug coverage, enrollees often get such extra benefits as hearing aids, vision and preventive care.
- Half of Medicare Advantage enrollees have incomes below $20,000.
- About 27% of Medicare Advantage plan members are minority enrollees.
An AHIP study also found that these plans are especially beneficial for low-income and minority enrollees. In fact, almost 7 in 10 minority enrollees have incomes less than $20,000.
There are special needs Medicare Advantage plans (for those with several chronic illnesses) and medical savings account plans (for those who want to manage some of their own healthcare dollars). Also, several studies have found that Medicare Advantage enrollees get higher quality care than those in standard Medicare.
In all of its guises, Medicare Advantage plans take a rigid, inflexible Medicare benefit and use those same dollars to create more benefits better suited to senior citizen needs.
Given this success, we should build on it. Let the market for senior care be wide open, with the government offering premium support for seniors who choose from a much wider range of options – including remaining in, and paying premiums to, a former employer's plan.
Unfortunately, some reactionary souls want to turn the clock back. Congressman Pete Stark (D – CA) wants to do away with the Medicare Advantage program altogether. Go figure.
For the AHIP study: Low-Income and Minority Beneficiaries in Medicare Advantage Plans
For the Consensus Group / Galen Report