The shift will also mean higher costs for taxpayers and all Medicare beneficiaries, some experts say. Payments by the federal government to Advantage plans average 102 percent of its spending on the fee-for-service traditional program, and that contributes to higher overall Medicare spending. This occurs in part because a bonus system awards extra dollars to plans that achieve high quality ratings from Medicare.
Advantage plans have also been found to submit to Medicare inflated bills that over-diagnose their patients. According to federal audits, the practice of “upcoding” crossed the line into fraud. Excess payments totaled $12 billion in 2020, according to the independent Medicare Payment Advisory Commission, which advises Congress.
The higher costs add financial pressure to Medicare’s hospital insurance (Part A) trust fund, as well as the taxpayers, beneficiaries and state-run Medicaid programs that fund the Part B program. The Part A trust fund is forecast to run dry in 2028, leaving revenue sufficient to meet 90 percent of the program’s obligations.
“On the one hand, Medicare Advantage allows employers to continue to offer retiree health benefits and potentially broaden benefits, and may lower their financial liability for retiree health,” said Tricia Neuman, senior vice president of K.F.F. “It also has the possibility of increasing Medicare spending.”
Insurers argue that Medicare Advantage group plans are simply one choice available to retirees. “Medicare rules require that retirees always have the option to opt out of enrollment in a group Medicare Advantage plan in favor of other forms of coverage that may be available,” said Heather Soule, a spokeswoman for United Healthcare, one of the largest providers of Advantage plans.
But for many retirees, joining an Advantage plan can be a difficult decision to reverse. Traditional Medicare should be paired with supplemental coverage — often a Medigap policy — to protect against potentially high out-of-pocket costs. But the best time to buy a Medigap policy is during the six months after you sign up for Part B (outpatient services), when insurers cannot reject you, or charge a higher premium, because of pre-existing conditions. After that time, you can be rejected or charged more in most states.
What’s more, when employers make this transition, retirees often face a choice: Join an Advantage plan or lose the benefit.
