Top 5 things your Medicare Advantage sales agent won't tell you.

Top 5 things your Medicare Advantage sales agent won't tell you.

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This article was first posted October 1, 2022.

The open enrollment period for Part C Medicare Advantage and Part D Drug Plans starts on October 15 and runs through December 7, 2022. If you're 64 or older, your residential mailbox is probably already overflowing with sales materials and your cellphone is running hot from the spam marketing calls.

The reason for all this attention is that Medicare Advantage tends to offer sales agents the highest commissions (up to a $750 commission on a new policy, and about half that in subsequent years if the policy stays in force.) You could build yourself a well-upholstered retirement annuity selling these things, if you were still able to sleep at night. [LOL]

2023 Maximum Broker Commissions for Medicare Advantage & Medicare Part D

The high commissions on Medicare Advantage are also the reason very few insurers offer low-commission/low-premium high-deductible Medigap Plan G. Why waste your time if they be "makin it rain" with Medicare Advantage?

Two years ago I outlined an analysis of my Medicare choices upon turning age 65 and several readers have asked if there is anything I'd change. I've been quite happy with traditional Medicare, a $44/month high deductible Medigap Plan G, and the cheapest Part D Drug Plan available in my zip code ($7.70/month in 2022). Price gouging in generic prescription drugs continues to be a problem with Part D insurers, so I'm using a GoodRx coupon and paying out-of-pocket when that's a discount to what the insurance company charges. That strategy saves me about $600/yr -- better to have that $600 in my pocket than the insurer's.

#1 -- Medicare Advantage "skims off" about 15% of the value of your annual Medicare benefit to fund "overhead, profit, and excessive executive compensation"

The actuarial value of your Medicare benefit averaged around $13,500/year in 2021. It varies a bit from state-to-state and county-to-county. Surprisingly, the lowest average Medicare spending is in the otherwise high-cost State of Hawaii. Unsurprisingly Alaska has the highest average costs with a rural population spread over a large frozen area that's hard to get to.

If you choose Medicare Advantage, the Centers for Medicare & Medicaid Services (CMS), transfers that average $13,500/year benefit to the private health insurer you select. In turn, the insurer is allowed to skim off up to 15% of that $13,500 in admin expenses (i.e., $2,025/yr) though in many urban areas competition may limit that skim rate to 12% or so. That 15% figure relates to the so-called Medical Loss Ratio or MLR. Medicare demands that Medicare Advantage insurers spend at least 85% of your benefit on actual medical services and no more than 15% on overhead & profit.

For 2021, traditional Medicare had program costs of $887.6 Billion, spent $839.3 Billion on actual medical services for its 63.8 million beneficiaries, and $10.8 Billion for administrative expenses. (See Page 12, 2022 Medicare Trustees Report). That's an admin cost of 1.2%.

What are you buying for that additional 13% or so in admin expenses for Medicare Advantage? Mostly you're funding aggressive marketing (and that $750 commission split between the sales agent and insurance broker who employes the agent), a for-profit bureaucracy designed to frustrate and delay your access to health care, and an ungodly level of excessive Executive Compensation. The table below compares the CEO compensation for the four largest Medicare Advantage insurers with the much more modest salary for the Administrator of the Center for Medicare & Medicaid Services (CMS) who is actually running a bigger organization with a much larger budget than any of the insurance CEOs.

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Medicare Advantage Insurer CEO 10-Year Compensation

A comparison of CEO compensation for the four largest Medicare
Advantage carriers with the annual salary of the Administrator of CMS
Company No. of Medicare Customers
in 2022 (Millions)

(See Note 1)
Ten-Year CEO
($ Millions)

(See Note 2)
Average Annual CEO
($ Millions)
UnitedHealth Group 7.9 349 34.9
Humana 5.0 188 18.8
(aka WellPoint)
4.1 167 16.7
CVS Health - Aetna 3.1266 26.6
Center for Medicare &
Medicare Services (CMS)
63.8 Less than 2 Less than $200,000/yr
(Note (1) -

(Note (2) - )

There's no "free lunch" in finance. If you're paying more in for-profit insurance company bureaucracy and Executive Compensation, you're getting less in actual hospital, doctor, and other medical services. Also, since your Medicare Advantage insurer is getting a lump sum up front, any health care they deny to you is reflected directly in their bottom line. Their financial interest are directly opposed to yours.

#2 - The AARP gets over $1 billion per year in advertising and promotional fees, most of it from the health insurance industry. That's triple what the AARP collects in member dues. Who do they work for?

AARP’s Billion-Dollar Bounty

AARP doesn’t detail how this business relationship works or how companies are vetted to determine they are worthy of the group’s coveted seal of approval. But its financial reports to the IRS show that AARP collects a total of about $1 billion annually in these fees — mostly from health care-related businesses, which are eager to sell their wares to the group’s nearly 38 million dues-paying members. And a paid AARP partnership comes with a lot: AARP promotes its partners in mailings and on its website, and the partners can use the familiar AARP logo for advertisements in magazines, online, or on television. AARP calls the payments “royalties.”

AARP’s 2020 financial statement, the latest available, reports just over $1 billion in royalties. That’s more than three times what it collected in member dues, just over $300 million, according to the report. Of the royalties, $752 million were from unnamed “health products and services.”


#3 - The "20% that Medicare doesn't cover" averages out to a lot less than 20% in most major illnesses.

Health insurance agents have been very successful in scaring seniors with the "20% that Medicare doesn't cover." But as this medical doctor points out, the actual copays you'll owe under Medicare amount to about 3.5% of the Medicare reimbursement. Sure it's a 20% co-pay on a doctor's bill, but the copay on a $1 million hospital charge is capped at just $1,556 in 2022 for up to a 60-day stay-- that's not even 1%.

Medicare deductibles and copays average 3.5% of what?

As Dr. David Belk explains, the average annual Medicare out-of-pocket expense for beneficiaries is 3.5% of the Medicare reimbursement, not 3.5% of the crazy high number the hospital bills you that you can safely ignore once you have traditional Medicare coverage with its protections against fee-gouging and "surprise billing".

If you look at Dr. Belk's article, he has the example of a $711,696 hospital bill from the Stanford Medical Center in Palo Alto, CA. The Medicare reimbursement was $74,959 and the Part A copay at the time the article was written was $1,260 -- that's 1.7% of the Medicare reimbursement.

#4 - There's a lot of suspected for-profit insurance company fraud in Medicare Advantage

Medicare Advantage Plans Often Deny Needed Care, Federal Report Finds
Investigators urged increased oversight of the program, saying that insurers deny tens of thousands of authorization requests annually.

Every year, tens of thousands of people enrolled in private Medicare Advantage plans are denied necessary care that should be covered under the program, federal investigators concluded in a report published on Thursday.

The investigators urged Medicare officials to strengthen oversight of these private insurance plans, which provide benefits to 28 million older Americans, and called for increased enforcement against plans with a pattern of inappropriate denials.

Advantage plans have become an increasingly popular option among older Americans, offering privatized versions of Medicare that are frequently less expensive and provide a wider array of benefits than the traditional government-run program offers....

Tens of millions of denials are issued each year for both authorization and reimbursements, and audits of the private insurers show evidence of “widespread and persistent problems related to inappropriate denials of services and payment,” the investigators found....People signing up for Medicare Advantage are surrendering their right to have a doctor determine what is medically necessary, he said, rather than have the insurer decide....


...and from the Wall Street Journal

Celebrity Medicare Sales Pitches Are Toned Down After Scrutiny
Soaring complaints and aggressive sales efforts result in tighter rules from regulators

The federal Centers for Medicare and Medicaid Services toughened its oversight after consumer marketing complaints surged 165% last year to 41,136 compared with 2020. Brokerages, agents and other marketing businesses tried to convince Medicare recipients to switch plans, with promises of perks in their new plans such as home-delivered meals, rides to doctors’ appointments and cash.

In some cases, beneficiaries would effectively pay for the perks with more-limited provider networks, forcing them to find new doctors, regulators say. The celebrity pitchmen haven’t been accused of violating any rules.


#5 - Your Congressman and Senators likely think Medicare Advantage is just wonderful

Nothing speaks to the bipartisan culture of corruption in Washington like the annual Congressional "oath of fealty" to their Medicare Advantage paymasters in the health insurance industry.


346 House members reiterate bipartisan support for Medicare Advantage

I'll leave it to the student to investigate how many of the Congressional signees are taking campaign contributions from the health insurance industry. [Hint: It's just about all of them -- and a few more who were too cowardly to sign the letter.]

Resources for additional information.

True Cost of Health Care, by David Belk MD
You need to read this first. Dr. Belk exposes all the lies health insurers tell you about traditional fee-for-service Medicare and how much it will actually cost you out-of pocket.

Medicare website

2020 Trustees Report on Medicare

Medicare Advantage Wikipedia

October – December 2020 Approved Medicare Supplement (Medigap) plan premiums (WA state)

National Association of Insurance Commissioners -- 2018 Medicare Supplement Loss Ratios

Comparing Medicare Supplement (Medigap) and Medicare Advantage plans

State Averages for the 2020 Medicare Advantage Monthly Capitation Payments

Medicare Advantage Plans Overbill Taxpayers By Billions Annually, Records Show

Proportion of branded versus generic drug prescriptions dispensed in the United States from 2005 to 2019

Adding an Out-of-Pocket Spending Limit to Traditional Medicare, Urban Institute (June, 6 2022)

Capping Medicare Beneficiary Part D Spending at $2,000, Urban Institute (March 2022)

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