When Don and Elizabeth Dersch, of Chester, Va., both 68, became eligible for Medicare a few years ago, they carefully weighed the costs of traditional Medicare and Medicare Advantage, the coverage provided by private insurers. They chose Medicare Advantage.
Their plan from Anthem covered the doctor visits, treatment, testing and hospital coverage that traditional Medicare covers, and it offered low co-payments, Medicare D prescription drug coverage and a YMCA membership.
One reason Medicare Advantage plans have attracted a growing number of Americans – 29 percent of the 52 million Medicare recipients have chosen them, according to Avalere Health, a research firm – is that they have been, in effect, subsidized by the federal government. Now the government is reducing what it pays the private plans, bringing payments in line with those for traditional Medicare.
Some insurers have dropped policies, or reducing services and network providers on existing policies.
The changes and promises of more to come have set some Medicare Advantage subscribers scrambling.
When the Affordable Care Act passed in 2010, the government was paying an estimated 12 percent more to Medicare Advantage insurers than to traditional Medicare providers. The law aims to close that gap with about $150 billion in cuts over a 10-year period; the proposed 1.9 percent cuts announced Feb. 21 are the latest step.
America’s Health Insurance Plans estimates total cuts for 2015 of 6 percent, on top of 6 percent cuts this year, said Robert Zirkelbach, a spokesman for the trade group.
In addition to changes in service, Zirkelbach and other industry officials predict increased premiums, co-payments and coinsurance may result. The Kaiser Family Foundation estimated that Medicare Advantage premiums will rise 14 percent in 2014, even as enrollment in Advantage plans continues to grow.
Debate over the proposed cuts is likely to continue, with no decision before April. People turning 65 this year and trying to determine what type of Medicare plan to sign up for may want to keep track of developments. For those already enrolled, the next opportunity to switch coverage comes with the next open enrollment season in October.
It is important to understand the differences between traditional Medicare and Medicare Advantage.
With traditional Medicare, most people pay no premiums for Medicare Part A, which covers hospital visits. Most will pay $104.90 a month for Medicare Part B premiums (and a $147 annual deductible), which covers doctor visits, tests and other treatments. They also pay a 20 percent co-payment for Part B coverage. High-income retirees will pay a higher monthly premium, the amount depending on adjusted gross income. Medicare Part D covers prescription drugs through private insurers; people who sign up for traditional Medicare may purchase a Part D plan separately. Many Medicare enrollees also purchase a Medigap supplemental policy to help cover Medicare co-payments and other medical costs not covered by Medicare.
Medicare Advantage plans cover everything Medicare Part A and B cover, and usually include Part D coverage. Some plans charge an extra premium in addition to the government-mandated Part B premium. Others charge no extra premium, although those plans are declining because of cost concerns. Advantage plans often offer coverage traditional Medicare does not, including vision and hearing treatments.