Medicare Advantage Plans

Some people love them; Some hate them; Doctor office hate them for the most part. But why?

To understand how and why these Medicare Advantage Plans came into existence, one has to go back to 1994. That was the year that Newt Gingrich and the Republicans won both the House of Representatives and the Senate. It was 40 years since the Republicans had the majority of both houses. They were successful in this effort by-in-large due to a political strategy called “Contract with America.” 

The contract said that if the American People elected them, they would bring up a vote on eight major reforms the first day in office. It included things like “Require all laws that apply to the rest of the country also apply to Congress.”  It was widely popular, and the strategy worked.

After implementing these eight agenda items as promised, the conservative congress looked for other ways that they could reduce government costs and waste. They looked at Medicare. Here is what they found: There is $50 billion a year wasted in the Medicare program. That’s a billion dollars a week.

The conservative congress passed legislation to reduce this waste by implementing what is called Medicare Advantage Plans. The idea was that private companies would take over and manage Medicare Claims. They would reduce waste by a series of health savings by monitoring certain procedures and require that these procedures be medically necessary through a pre-certification process. It meant that doctor’s offices would have extra work and that is the reason they did not like them.

I recall an incident that my own mother experienced with her own doctor. He came into the treatment room and said, “we ought to go ahead and run a certain test while you are here.”  “My mother replied, “Dr. is that really necessary?”  Dr. replied, “might as well, Medicare will pay for it.”

Can you see how this would result in waste?

From a consumer point of view, was Medicare Advantage Plans a good thing?

My first client that implemented a Medicare Advantage Plan back in 2007 told me that he and his wife have saved over $80,000 over the last 17 years. That’s $80,000 that he didn’t have to pay which left them more money for their other retirement needs. Could you use another $80,000 in retirement funds?

Many of these Medicare Advantage plans have a $zero premium. How is that possible, you may be asking. The answer is that Medicare is paying these private health insurance companies to take over and pay Medicare client’s medical bills. Remember that $50 Billion a year in waste. Medicare could afford to do that.

From the consumer’s point of view, they didn’t have to pay $2,000 to $4,000 per year in Medicare Supplement premiums (maybe more) . See, Original Medicare didn’t pay but 80% Of Medicare Part B charges (out-patient). And there was no limit as to how much this out-of-pocket cost could be with Original Medicare. All Medicare Advantage Plans have a Maximum out of pocket cost per year. And most co-pays wouldn’t add up to more than $1,000 on a year-by-year basis for most Medicare Advantage clients. Some might hit the maximum. But very few.

And because Medicare Advantage Plans did not compete on “Cost” (zero premiums to the consumer), they had to compete on ancillary benefits like Dental, Hearing and Vision coverage. Original Medicare and old time Medicare Supplemental Insurance plans offered no ancillary benefits.

Medicare Advantage plans also offer $2,000 or more for dental services. That is important as an aging population are incurring more and more such expenses. They too, they would pay for eye exams and glasses. My own personal plan gives me an allowance for over-the-counter items like Q-Tip’s, vitamins and even gives me a benefit for healthy foods, utility bills and pet items like dog/cat food. In fact, I selected this particular plan because I have two big dogs that I have to buy dog food for anyway. When I learned that they would give me money for dog food I said, “Count Me In” and that is one of the primary reasons I went with this company. Overall, these OTC (over the counter) and Health food/dog food gives me another $960 a year that I use to pay for out of my own pocket. Let’s do a little math here comparing Medicare Supplement vs Medicare Advantage Plans.