It Can Happen Here: Medicare Advantage Disadvantages Retirees Nationally and in C-U

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The New York Times recently published a story about how Medicare Advantage (MA) plans rip off consumers and taxpayers through a range of dubious practices up to and including fraud. These practices contribute to higher profit levels which, in turn, underwrite mergers in the health care industry. Industry colossuses further expand market share by offering seemingly great deals to consumers and to the employers, public agencies, and even unions that offer retiree group health plans. The extension of MA plans threatens the very existence of traditional Medicare, and quality insurance coverage for all our senior citizens.

Consumers often suffer due to these trends, and Champaign County residents are no exception.

National Background

MAs are available to Medicare-eligible individuals or to members of public or private retiree health plans, as well as those managed or co-administered by unions. While traditional Medicare pays hospital and doctors’ bills directly, MAs contract with the federal or state agencies administering retiree benefits or with employer or union-run group plans to take over the processing and payment of service claims.

In 2021, 26.4 million people, or 42 percent of the total Medicare population, were enrolled in MAs, and MAs have seen a 50 percent increase in enrollment through employer and union-sponsored plans over the last decade.

The federal government has promoted MAs as a vehicle to provide less expensive, higher quality health care for seniors, but data suggests these goals have not been met. A recent Medicare Payment Advisory Commission study noted that the government spends 4 percent more for each MA member than it does for someone in the regular fee-for-service program.

Additional costs occur because MAs charge for services that were never provided or were unnecessary, padding charges to Medicare by presenting “dummy” service claims, and profiling beneficiaries as “sicker than they actually are.”

Higher revenues also derive from often refusing coverage for doctor-ordered procedures and restricting access to a limited network of providers.

Excess profits increase the seeming attractiveness of MAs to seniors. The companies can now afford to offer benefits not available through traditional Medicare—like dental and vision care, and gym membership—while still retaining an ample portion of the higher revenues they generated. The problem comes when patients—especially older, sicker patients—need more expensive interventions, not least nursing home care.

Excess profits also provide an important source of cash to undergird the mergers of insurers, retail pharmacies, and other health care businesses. Mergers hit a record high in 2022 with 3000 such transactions, of which just 13 generated $19.2 billion in extra revenue for the companies.

Consolidation dramatically increases the bargaining power of these combined entities, allowing them to offer deals to cash-strapped employers, including governmental entities—and in some cases, the unions they bargain with—that are hard to refuse.

This has led to a trend of governments, employers, and at times unions being complicit in enrolling retirees into MAs that disadvantage them, and even using dubious practices to facilitate the change, such as not making it clear that they have the option to opt out. One especially problematic development is an “experimental” program that continues under the Biden Administration to move individual retirees into MAs without their consent. Another example comes from New York City, where Mayor Eric Adams and United Federation of Teachers leaders have agreed to enroll more than 300,000 civil servants, again without consent, into an MA.

But New York City is not alone in seeing retirees experiencing disadvantages due to the presence and influence of MAs.

Evidence from Champaign County

 Champaign County residents offer episodic evidence of problems with MAs. The author, for example, herself covered as an individual under a Health Alliance MA, was twice denied an expensive medical procedure that could confirm potential heart damage and what care was appropriate going forward. It took two appeals and the intervention of federal Medicare administrators for this decision to be reversed. Many retirees, especially the very sick or disabled, are not able to utilize a multi-stage appeal process.

In another case, Beth Edwards (her name has been changed at her request), a retired teacher covered by traditional Medicare with a supplemental drug policy and basically satisfied with her coverage, was urged to at least check out the MAs offered by the state. Within minutes of asking for program details from a State University Retirement System (SURS) representative, this individual started enrolling her in an MA. When she dissented and said she was not ready to so enroll, the representative seemed to continue with the process anyway. Unnerved, she demanded to speak to the woman’s supervisor, repeating her unwillingness to join the plan. She thought the matter was settled, only to later discover that the transfer to the MA had gone forward. Given the potential for cost savings, it is worth considering whether it had become department policy to overzealously “push” retirees into MAs. Beth had to fight for months to be “disenrolled” from the plan and return to her former status quo. As one of her own doctors observed, the stress caused by her efforts may have led to the stroke she had during this period.

Affecting many more people in Champaign County is the recent move by the state to offer only one MA preferred provider organization (PPO) plan to all public sector retirees, including university faculty and staff, namely Aetna PPO. Although a contract with Carle Hospital has since been signed, there was an obvious concern for many retirees that they would no longer have access to their regular Carle doctors. Care disruption remains a future possibility, as Aetna has in the past removed doctors from the HMO network offered Springfield retirees. Complaints also have been common about the quality of services, including the limited number of within-network specialists in certain categories within the HMO plan.

When Illinois made the decision to award a PPO contract to Aetna, the decision-making process left a great deal to be desired. There was no avenue for input from retirees. The application proposal submitted by Aetna had error-filled network doctor lists. Quality complaints about Aetna’s prior performance in the state were not taken into serious consideration, nor was Aetna’s national reputation for coverage denials and padding. What seems to have saved the day for Aetna was that the company received the highest possible pricing rating, offering the state five premium-free years of service.

How could Aetna afford going without premiums? First, they would still be reimbursed for covered retiree services; but most importantly Aetna, through a major merger with the CVS drug store chain in 2017, has become a health care colossus. Its revenues are enhanced where it outdoes the competition by lowballing service prices, prices that might eventually rise once their position in new markets is secure. Don’t be surprised, moreover, if Aetna’s contract eventually secures additional revenue by charging less for drugs purchased at CVS stores and so expand drug sales, a practice that the company has used elsewhere.

What To Do

The state’s Aetna PPO contract has drawn intense criticism from multiple quarters. Both Democratic and Republican state legislators on the Senate Insurance Committee are pushing to hold hearings on the contract award process for public retiree health services and are seeking greater process transparency. At the federal level and in New York City, retiree and health care advocacy groups like Physicians for a National Health Plan have joined with dissenting union members to challenge moving retirees out of traditional Medicare into MAs without their consent. Multiple health care advocacy groups are especially concerned that the federal government’s experimental MAs are major steps toward privatizing Medicare, leaving US retirees completely at the mercy of health care insurers, thus unchecked in their ability to set prices and engage in practices based only on profit-making and not service quality. If saving and securing quality health care for seniors concerns you, join in efforts such as these where you can.

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