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This article was first posted October 16, 2023. Most early retirees seem to understand that if you're paying a financial advisor a fee of 1% of assets per annum to tell you to buy a low-fee index fund, that's going to reduce your returns over time. Over 40 years, you'd lose about 25% of the account balance to the 1% fee. You can do the same kind of analysis for your Medicare choices at age 65. My preference is to have as much of my Medicare benefit as possible going to pay for doctors and hospital services, and as little as possible lost to administrative overhead, sales and marketing costs, and excessive Executive Compensation. Lets compare the admin expenses for Medicare Advantage versus traditional Medicare plus a Medigap Supplement, and a Part D drug plan. I discussed this analysis back in October 2000. Traditional Medicare spends about 1.3% of program costs on administration and 98.7% on payments to doctors and hospitals. That admin cost amounts to $156/yr out of the actuarial value of the average Medicare benefit of $12,000/yr. With Medicare Advantage, that $12,000 average benefit is transferred to the for profit health insurer you choose. Your insurer is then allowed to siphon off up to 15% of the $12,000 to admin costs, though heavy competition in urban areas might drop that to 12%-13%. That's about $1,500/yr -- around 10 times the admin costs in traditional Medicare. And it doesn't stop there. Medicare Advantage insurers can screw you a second time by forcing you to do business with a related or captive company they profit from. To get a medical or drug expense to count towards your deductible, you must do business with an in-network doctor or hospital, and your insurer's captive pharamacy benefit manager (PBM). The reason your Medicare Advantage Plan is offering you a "free" Part D drug benefit, is because they're charging you double or triple the price on generic drugs. That overcharge goes directly to parent company's profit and excessive Executive Compensation, and doesn't count towards the 15% limit on overhead & profit for the insurance company since the drugs are a medical expense to the insurance plan itself. As demonstrated in the table below, Kaiser Permanente is far and away the innovator in this approach.
There are so many ways a Medicare Advantage insurer can screw you beyond the run of the mill insurance practices like delaying and denying claims, and slow-paying doctors and hospitals, it's not surprising that the gross margins for the parent companies exceed the $1,500 per beneficiary one might expect.
The public policy advocacy group Physicians for a National Health Plan estimate that Medicare Advantage plans are overcharging taxpayers somewhere between $88 Billion and $140 Billion per year. If you clawed back that $140 billion per year, that would be enough to eliminate the Part B Medicare premium for each of the 66 million Medicare beneficiaries ($169.90/month for 2023). It is no coincidence that corrupt AF Sen. Joe Manchin would be leading 63 bipartisan senators in support of Medicare Advantage. If one or both of your senators signed the letter, call their office and ask them why they're trying to make your health care more expensive and more of a hassle while bankrupting Medicare with the additional admin costs. But by far the biggest testament to the deplorability of Medicare Advantage comes from the agents and brokers who sell Medicare Advantage plans. When asked what choice they'd make for their own health coverage, "most of the brokers and agents say they would personally choose Traditional Medicare with Medigap over Medicare Advantage plans. The reason? Better coverage and choices, especially as people get older." Heed their advice. They're saying the quiet part out loud. Resources for additional information.Medicare website 2022 Trustees Report on Medicare Vox News: The subtle privatization of Medicare Physicians for a National Health Program: Our Payments, Their Profits Senators press Medicare Advantage insurers over claims denials Another week, more Medicare dis-Advantages New Reporting on Insurance Claim Denials Highlights 'Scam' of For-Profit Healthcare I Set Out to Create a Simple Map for How to Appeal Your Insurance Denial. Instead, I Found a Mind-Boggling Labyrinth. Manchin Leads 63 Bipartisan Senators In Urging Support For Medicare Advantage Program Medicare Advantage spending, medical loss ratios, and related businesses ; An initial investigation A Medicare broker can help find the best coverage for you. Here’s what to know before you hire one Scripps Medicare Advantage cuts also kill out-of-network access Hospitals are dropping Medicare Advantage left and right True Cost of Health Care, by David Belk MD Medicare Advantage Wikipedia Profits, medical loss ratios, and the ownership structure of Medicare Advantage plans 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 |
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