Medicare Advantage $$ and How It Works?

jhenderson99 · 08-19-2009, 09:44 AM

Hey everyone, I have a Medicare Advantage question regarding the overall cost of the program.

I read today that the Obama admin wants to cancel Medicare Advantage because of the $12 bil price tag. I know the private companies get the $96 per Medicare part B client per month but are they subsidised beyond the dollars that Medicare gets for the same services? I always assumed this was an example of private industry taking the same $$$ government gets and giving more? .....Thanks.....

jlove · 08-19-2009, 10:01 AM

"Hey everyone, I have a Medicare Advantage question regarding the overall cost of the program.

I read today that the Obama admin wants to cancel Medicare Advantage because of the $12 bil price tag. I know the private companies get the $96 per Medicare part B client per month but are they subsidised beyond the dollars that Medicare gets for the same services? I always assumed this was an example of private industry taking the same $$$ government gets and giving more? .....Thanks....."

I cannot see that the government could afford to cancel advantage plans because that would put everyone back on Medicare Part A and B which would deplete the money available faster than ever before.

I agree with you that it is a private industry taking the same money with "less hands in the pot", managing the money better and in turn providing additional benefits to the clients.

GreenSky · 08-19-2009, 10:25 AM

Medicare gets the $96.40 from beneficiaries which pays 25% of the actual Part B costs from most people. Higher income pay more. There is no monthly cost for Part A.

The actual cost for a medicare beneficiary is more like $700-800 a month. This amount plus about 10-20% more is paid to the Medicare Advantage company. It's the extra amount that the administration objects to.

Originally, plans were paid 95% of the actual cost so there was a savings to the government. With this amount, plans were able to provide close to 100% coverage for medical, included Rx, vision, dental, etc. Of course, these were all HMO plans.

Hope that answers your question.

Rick

jdeasy · 08-19-2009, 11:08 AM

Originally Posted by jhenderson99

Hey everyone, I have a Medicare Advantage question regarding the overall cost of the program.

I read today that the Obama admin wants to cancel Medicare Advantage because of the $12 bil price tag. I know the private companies get the $96 per Medicare part B client per month but are they subsidised beyond the dollars that Medicare gets for the same services? I always assumed this was an example of private industry taking the same $$$ government gets and giving more? .....Thanks.....

The private companies do not get the $96.40 per month for the part B premium. Or the higher premiums for the higher income folks for that matter.

I know many agents, especially Humana agents, have told enrollees that was how the MA plans got paid for. That's one of the first misconceptions we have had to correct when replacing Humana plans.

Plans are paid the captitation rate to provide the Medicare plan to enrollees. That plan includes the enrollee's part A and B plus any additional benefits that a plan might have. In 2008 the capitation rate was over $9000 annually per enrollee for an MA only plan.

CMS estimates that it now costs 15% more to fund the MA plans than to just pay for traditional Medicare. That's the rub. The politicians are saying that they will cut the 15%. The companies are saying they can't provide the services with that 15% cut.

These companies are supposed to be more efficient than the government. Why can't they provide the services at the 100% rate or less?

jhenderson99 · 08-19-2009, 11:41 AM

Thanks - Yes, good education.

I have to think the recipient is getting more than 15% in value - even if you calculate just the Part D benefit, not to mention eye, vision, etc.. Now, what would the recipients be paying for all of this in a supplement? I would think there has to be a middle ground somewhere to save the cost and add the benefits.

jdeasy · 08-19-2009, 12:10 PM

Originally Posted by jhenderson99

Thanks - Yes, good education.

I have to think the recipient is getting more than 15% in value - even if you calculate just the Part D benefit, not to mention eye, vision, etc.. Now, what would the recipients be paying for all of this in a supplement? I would think there has to be a middle ground somewhere to save the cost and add the benefits.

The extra 15% is not taking the part D into account. It was over $9000 per person for an MA only plan.

It doesn't really matter if the enrollee is getting more than 15%. The taxpayers are paying the extra 15%. Are they gettin their money's worth?

Taxpayers should not pay extra for the Part C. If companies can provide services at the same cost as Medicare and give people a little extra, then great! The MMA was supposed to save Medicare dollars by privatizing Medicare. Companies lined up to say how much more efficient they could be than the government. They sold a bill of goods to CMS. The problem is that we have to pay for that bill of goods.

stormtracker · 08-19-2009, 02:15 PM

But, the question remains-- where does the government propose to shift the burden to? Or, more likely, is this just a knee-jerk reaction with no real thought to the consequences?

MrMack · 08-19-2009, 03:31 PM

But, the question remains-- where does the government propose to shift the burden to?

To the consumers, they have to pay full cost for supplements and drug plans or have no coverage.

That could increase the number of people on Medicaid in the future unless they cut that to.

VaDwayne · 08-19-2009, 09:37 PM

Originally Posted by MrMack

But, the question remains-- where does the government propose to shift the burden to?

To the consumers, they have to pay full cost for supplements and drug plans or have no coverage.

That could increase the number of people on Medicaid in the future unless they cut that to.

You are exactly right. The government seems to be reactive instead of proactive. It is almost like they are saying, Medicaid, we'll fix that when the time comes, at least we handled this problem today.

What's the opposite of progress?

CONgress

G.Gordon · 08-24-2009, 01:53 PM

This wouldn't be an issue if the MMA of 2003 didn't modify the MA distribution and left it like it was.

What happened with the MMA was to put low/no cost plans on the shelf to be picked by seniors that prior to this didn't have those plans available.

So here's what happened IMO.

Seniors with little or no health issues saw those plans as a means to save money. Prior to them going MA they cost medicare nothing if they didn't go to the doctor. Now they cost medicare the captation rate if they go or not.

Seniors with health problems stayed put due to limited out of pocket and predictable coverage. So these people keep costing medicare money.

So basically seniors that weren't costin medicare much at all now cost them, seniors that were costing them money still do... lose lose. Dumb idea by the last administration IMO.

jdeasy · 08-24-2009, 02:00 PM

Originally Posted by G.Gordon

This wouldn't be an issue if the MMA of 2003 didn't modify the MA distribution and left it like it was.

What happened with the MMA was to put low/no cost plans on the shelf to be picked by seniors that prior to this didn't have those plans available.

So here's what happened IMO.

Seniors with little or no health issues saw those plans as a means to save money. Prior to them going MA they cost medicare nothing if they didn't go to the doctor. Now they cost medicare the captation rate if they go or not.

Seniors with health problems stayed put due to limited out of pocket and predictable coverage. So these people keep costing medicare money.

So basically seniors that weren't costin medicare much at all now cost them, seniors that were costing them money still do... lose lose. Dumb idea by the last administration IMO.

I never looked at it that way, but, that's very likely the way it happened. It also hurt med sups because the people staying on them were the ones using them all the time.

G.Gordon · 08-24-2009, 02:05 PM

Originally Posted by jdeasy

I never looked at it that way, but, that's very likely the way it happened. It also hurt med sups because the people staying on them were the ones using them all the time.

Ding ding ding... exactly right. The ones that would have been offsetting the claims for the sicker left so the claims losses got richer over night. I'd like to see some stats on premium increases after the first season of MMA 2003 went into effect verses increases before.

MedSuppPro · 08-24-2009, 06:21 PM

I've tracked MedSupp rate increases and the biggest industry average increase occurred after the MedicareChoice mass disenrollment of 2001. Since this occurrence, rate increases have followed the medical inflation trend.

MedicareRisk plans were replaced by MedicareChoice plans which were then replaced by Medicare Advantage plans. All three had one thing in common -- different Presidents.

jamesflou · 08-24-2009, 10:05 PM

I read somewhere that the MA companies were subsidized $5000 per enrolled but it may have been higher. In actuality that's how they could pay agent commissions on the zero and low monthly premium plans.