Medicare Advantage plans have been marketed – some would say “aggressively” marketed – as a sort of one-size-fits-all solution to the Medicare dilemma for seniors. MA plans supposedly offer the convenience of lower premiums along with “package pricing” that rolls prescriptions, doctor visits, and extras like hearing and vision care into one simple plan with one affordable monthly bill. Many offer gym memberships and a host of other goodies in their plans.
This blend of convenience and perceived value (not to mention untold millions spent on advertising) helps explain why more than half of eligible Medicare beneficiaries have opted for MA plans in recent years. However, based on a barrage of articles, including this one from Barron’s, the bloom may be off the Medicare Advantage rose. That’s because escalating costs have forced some carriers to hike premiums, cut benefits, and even pull out of some markets entirely, a move that has forced 500,000 policy-holders to seek new coverage.
This is a timely topic since those currently on MA plans have until the end of March to make changes in their coverage. If that includes you, should you change? Let’s see what Elizabeth O’Brien has to say – she wrote the Barron’s article, and we’ve done our best to capture her story accurately. (Note that a subscription may be required to access the Barron’s piece.)
Attractive MA Benefits Trimmed Due to High Costs
According to O’Brien, Medicare Advantage plans aren’t as attractive as they used to be, and the problem is getting worse. “Rising costs are squeezing many Medicare Advantage insurers,” she writes, “causing them to scale back benefits they’ve used to attract members.”
She adds that this 3-month time period is a key window for MA beneficiaries who find themselves stuck in a plan that no longer meets their needs. If that’s you, “you can switch through March 31 during the annual Medicare Advantage Open Enrollment Period. Given the many changes to plan designs for 2025, it’s a particularly important opportunity this year,” O’Brien writes.
Medicare Advantage Open Enrollment Isn’t for Everybody
When people think of Medicare open enrollment, they’re usually thinking of the period from mid-October through early December when everyone has the chance for a Medicare do-over. That’s not the case during the current MA open enrollment period.
“Unlike the fall open enrollment period,” O’Brien explains, “this one is open only to those who are already on Advantage, the privately run alternative to traditional Medicare that enrolls about 33 million Americans, or more than half of the eligible Medicare population. From January 1 through March 31, enrollees can switch to another Advantage plan or go back to traditional Medicare and buy a stand-alone Part D drug plan.”
(There are exceptions to those restrictions on who can participate in MA open enrollment. For example, as we explained in this Blog article, when you move outside your Medicare plan’s coverage area, you have the right to choose a new plan. The same is true if your plan ceases operation where you live.)
Medicare Advantage Sweetens the Pot with Extras
As the Barron’s article explains, Medicare Advantage plans (officially called Part C plans) combine Part A hospital coverage and Part B outpatient coverage, offering the same benefits as traditional Medicare, but with a more restrictive list of participating doctors. Different plans from different carriers charge varying premiums and co-pays. Prescription coverage is generally included.
“Beyond that,” says O’Brien, “Advantage plans typically offer supplemental benefits that aren’t included in traditional Medicare, such as dental, vision, and hearing coverage. While they’ve long acted as a draw for new members, these ancillary benefits were always relatively limited in nature. Now, some have been reduced even more due to cost pressures the carriers are facing.”
For her article, O’Brien spoke with Medicare consultant Diane Omdahl who gave a hypothetical example: “a plan might still offer a set dollar amount of dental benefits—say, $2,000 a year—yet cut the denture coverage from 100 percent to 50 percent.” On paper, the benefit appears unchanged, but in reality, the cut can be substantial.
Extra Benefits Don’t Translate into Significant Savings
Are those extra bennies worth it? Often, says Barron’s, the answer is no.
“Those ancillary benefits don’t save Advantage enrollees much money anyway, either due to their limited nature or to limited awareness of them,” O’Brien reveals. “From 2017 to 2021, Advantage beneficiaries paid 9 percent less out of pocket for eyeglasses than those on traditional Medicare and 9.3 percent less for dental visits, yet no less for hearing aids, according to a recent study in JAMA Network Open.”
Medicare officials believe part of the problem with the extras in MA plans is that beneficiaries don’t know they have them, so new rules have been initiated for 2025, says this report from Advisory.com. “To ensure that enrollees are aware of supplemental benefits in their MA plans,” the article states, “plans are required to send out a ‘Mid-Year Enrollee Notification of Unused Supplemental Benefits’ between June 30 and July 31 of every plan year. The notifications must be tailored to each enrollee and include the scope of the benefit, cost-sharing, instructions on how to access the benefit, and more.”
It will be interesting to see if these notices “move the needle” and cause more people to access the benefits they’re paying for.
Restricting Their Network, Trimming Drug Coverage
MA insurers are saving money in other ways that make these plans less appealing, says Barron’s.
“In addition to tweaking supplemental benefits, plans might make changes to their network of participating doctors or drug coverage that make them no longer attractive to members,” O’Brien writes. “While any benefit changes for the following year should have been outlined in the Annual Notice of Change that participants receive each fall in the mail, people often don’t study that and only become aware of changes when they try to use their coverage in the new year.”
Prescription coverage can also catch policy-holders unaware. “Many Advantage plans have made adjustments to their drug coverage,” says O’Brien. This can involve changes to the formulary (the list of covered drugs) or possible financial changes such as new deductibles. The net result: higher out-of-pocket costs.
Her advice: if your plan has changed in ways you don’t like, check out other options on the government’s plan finder tool.
Changing Plans May or May Not Reset Out-of-Pocket Tally
If you change, say, in March, and you’ve already spent medical dollars in January and February, does your out-of-pocket tally start over with your new plan? Possibly, says O’Brien.
The good news is that the maximum out-of-pocket drug cost for 2025 is now set at $2,000, and that limit applies across plans, according to the article. That means “any amount you accrue under one will carry over into the next if you decide to switch.”
“Other outlays, such as out-of-pocket spending toward a plan’s annual out-of-pocket maximum, may transfer over if you switch to a similar Advantage plan from the same organization as your current one,” O’Brien writes. “If not, you may face a reset if you change,” according to Juliette Cubanski, Medicare policy expert at KFF.
Option of Returning to Traditional Medicare Isn’t Guaranteed
The favored option for many may be to abandon Medicare Advantage altogether – but that door may be closed, or at least harder to get through.
“Enrollees may want to exit Advantage altogether and return to traditional Medicare,” says O’Brien, “which has fewer restrictions. Under traditional Medicare, you can visit any doctor in the country that accepts Medicare, and you generally don’t have to get referrals or obtain prior authorization for procedures, as is common under Medicare Advantage.”
This option entails also buying what’s called Medigap or Medicare supplement coverage from a private insurer, and that’s where the problem lies. After your initial 6-month Medicare eligibility period during which Medigap plans have to sell you coverage, you will be “subject to medical underwriting and can be denied a policy or charged more based on your health status,” O’Brien warns. “Coverage criteria differ by insurer, so if you’re denied by one, you can try another.”
Medicare’s rules explain how access to a Medigap supplement plan isn’t guaranteed, outside of certain limited circumstances. (There are also a handful of states in the northeast with different rules. Residents of these states generally have fewer Medigap restrictions.)
One essential note, O’Brien cautions: “If Medigap insurance is important to you, don’t disenroll from your Medicare Advantage plan until you have ‘the confirmation in hand’ that you’ll be issued a policy.” You don’t want to be left without health insurance!
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(originally reported at www.barrons.com)