The debate continues over Medicare Advantage and whether or not private Medicare plans are a good thing for seniors and/or Medicare.  Plan information is now available on the Medicare.gov website where you can compare the details of plans offered in your state and county.

I decided to take a look at plans in Florida where Medicare pays insurance companies the highest amount for seniors enrolled in Medicare Advantage plans, and I was shocked to see that seniors in Florida are not facing the same cost increases as older citizens in Arizona. In fact, for seniors enrolled in most Medicare Advantage plans in Florida (HMO plans), their healthcare is practically free!

 Let's look at plans offered by the same company, Humana, in both Arizona and Florida.  I was shocked by the differences.

 Senator Kyl of Arizona has been a vocal defender of Medicare Advantage plans, saying seniors in our state should not lose the benefits and choice offered through private Medicare plans.  Senator Ben Nelson, a Democrat from Florida, added an amendment to the Senate Finance Committee Health Care bill that would protect added benefits in Medicare Advantage plans such as free gym memberships, dental and vision services.

Senator Kyl seems to be protecting choices for Arizona seniors that are mediocre at best, while Senator Nelson's constituents have the gold standard in healthcare plans.

 My question is, "How and why are seniors in Florida getting practically-free healhcare while seniors in other states face rising costs and less coverage?"  Never mind the free gym memberships. Why do Florida seniors pay nothing for hospital stays and doctor appointments?

I have been reading lots of blogs about healthcare reform and I recently found myself corresponding with policy wonks who write about healthcare at a level that is difficult for me to comprehend.  These are PhD-types who write reports about Medicare and health insurance with statistics and cost analysis - and charge $900 for a copy of their reports.

I learned something very interesting from my correspondence about how Medicare is supposed to work, though I'm not sure I like it.

Apparently, people who have Medicare Supplements are costing Medicare more money than if they did not have these "Medigap" plans, which cover the gaps in Medicare coverage. According to one study, Medicare was designed with deductibles and co-insurance (20%) so that seniors would have to share in the cost of their health care. By sharing the cost, seniors would be unlikely to overuse the system, thus holding down Medicare's expenses.

But when people buy and pay for a Medicare Supplement ($100-$250/month) they can be 100% covered for their Medicare-covered healthcare costs and are likely to seek out more care.  Thus, these people will cost Medicare, which pays 80% of their bills, more money.

Here is something the the Incidental Economist wrote to me:

"As for health care use being in part dependent on OOP (out-of-pocket) cost: that's classic moral hazard, a standard concept in insurance. The Rand health insurance experiment is the classic study on this. To overly generalize, they found that greater OOP cost led to less use but had no significant impact on health outcomes. (This is, of course, controversial.) If true, or even mostly true, it suggests a lot of overuse of care that could be reduced by having folks face more of the cost. That's what consumer-driven health care is about, in part."

I understand this concept, but it kind of shocked me.  As an insurance agent I tell seniors that the best coverage for them is Medicare plus a Medicare Supplement plan F. This will cover just about 100% of their medical bills.  But I'm apparently undermining Medicare by helping these people get the most complete coverage possible.  And apparently they might use too much healthcare.

When people are diagnosed with cancer they must pay 20% for radiation and chemo therapy. If they have a Plan F Medicare Supplement they will see no medical bills. If they have only Medicare, they will face thousands of dollars in bills for their 20% of the cost. This is a major cause of bankruptcy for seniors.

Perhaps those who are 100% covered seek more help to try to save their lives, and I guess this is a bad thing according to economists and number crunchers.

Democrats don't like Medicare Advantage (private Medicare plans offered by insurance companies but funded by Medicare). They are targetting Medicare Advantage for big cuts, starting in 2010. But Democrats don't seem to understand how these plans work - and they don't see the fastball that is aimed right at their head. 

With 10.5 million seniors enrolled in Medicare Advantage plans, the insurance companies must be chomping at the bit to ring the alarm bell about how reduced funding will change their enrollees' Medicare benefits (and the insurance companies' profits).  Humana got in trouble for jumping the gun and sending out a letter warning seniors about how health reform will hurt their Medicare benefits.

Democrats don't seem to realize that when seniors receive their Annual Notice of Change (ANOC) from their Medicare Advantage plans in late-October, they will be getting the message loud and clear.  Plans will be changing for 2010 with higher premiums and higher co-pays for doctor visits and hospital stays. And the real cuts to Medicare Advantage are coming up for 2011 and 2012.

As an insurance agent I don't think Medicare Advantage is the best coverage for seniors. But seniors in these private plans are going to see changes in their benefits.  (Sample enrollment numbers are: 32% in Arizona; 41% in Oregon; 36% in Pennsylvania;  34% in California and Rhode Island.) 

It amazes me that Democrats don't see this fastball coming straight at them.  The millions of seniors who pay attention to their "Annual Notice of Change"are going to be mad as hell - and Republicans will be happy to help them understand how they are being hurt by changes (forced by Democrats!).  As a Democrat I would argue that the insurance companies are more concerned about their profits than the welfare of seniors enrolled in their Medicare Advantage plans, but I don't think this argument is going to go over very well. It's a bit  more complicated than "You're Medicare IS changing!"

I just got a call from my business partner who asked me if I watched the Obama speech last night. I was quite surprised to hear her say she had watched it...and she thought it was GOOD!

I am surprised because she used to send me those crazy emails from birthers and Obama haters.  I finally told her she'd better quit it or we wouldn't be business partners any more. We avoid talking politics because she falls for the "socialist" label - even though she doesn't know what that really means.

But she said she liked what Obama had to say last night. And she thought the Republican who yelled out, "you lie" was way out of line.  I think she finally listened to Obama and could understand what his vision for health reform is. And she likes it - probably because she is self-employed and pays $1400 per month for health insurance for herself and her husband (which she says she can no longer afford). I think she finally sees how changes would help her, and it all sounds very reasonable.

So maybe there is hope that Americans will get behind change. If my anti-Obama colleague has changed her mind about healthcare reform, it's a very positive sign.

Last week I was on a plane to Seattle and I happened to sit next to two ladies from British Columbia, Canada. Being in the insurance business I had to ask these ladies to tell me about "the terrible health care system in Canada". 

From the confused look on their faces, it was clear they weren't sure if I was serious about "the terrible system" comment, so I quickly told them I was just kidding. They gave me a relieved smile and we proceeded to spend the entire flight talking about health care in Canada and the United States.

Pat, who was sitting next to me, is a nurse who works for a non-profit home support agency which is contracted with the government in British Columbia to provide a variety of services. She said they have 1,000 community health workers who provide in-home care for seniors.

The impressive list of in-home services ranges from skilled nursing care to housekeeping to housing for seniors with dementia. I was even more impressed when she said elderly Canadian veterans can get help with yard work - paid for by the government!

Canadians pay for these services on a sliding scale, based on income, but the amounts are modest and affordable for everyone, according to Pat. Some people pay nothing while others pay 20%, 40%, or more of the costs, based on their income.

We talked about how much health insurance costs in each of our countries, and I told her I work with a woman who has been self-employed for many years and pays for health insurance for herself and her husband.  The monthly premium is $1,400 per month.

The Canadians shook their heads in disbelief.  They said most Canadian employers pay for their workers' health insurance premiums, which are:  $54.00 per month per individual;   $96.00 for family of 2; $108.00 for family of 3 or more. Once again, I was very impressed.

I asked the Canadians what truth there might be to stories about long waits for medical services in the government-run program.  They said there are waits for things, but, "if you have a life-threatening illness you are cared for immediately", Pat said.   Her daughter had a brain hemorrhage at 16 and had brain surgery - at no cost to the family.   Her grandson was diagnosed with Leukemia at age 5, and went through 5 long years of treatment and many long months of hospital stays - at no cost to the family.

 Pat did have an example of having to wait for surgery.  She said she had problems with her gall bladder and went on a wait list for six months. But, she said, "If I had had an acute episode, they would have operated on me right away." She seems very happy with her government-run health care, and I was impressed that it all seems so normal.
 
As we finished up our conversation, Pat said there are issues with too much demand for services in some part of Canada.  She said, "For home support there are no waits in Victoria, but in other parts of the country I think they have a shortage of staff and there is a lot more of an expectation that family will care for the elderly until services can be provided".

I think the key phrase here is "services can be provided".  As an insurance agent, my line of business is Medicare related. The majority of my clients are moderate and low-income seniors, and many live alone with no family nearby, and few, if any, government services. While I'm sure the Canadian system isn't perfect, it sounds a lot better than what we have in the United States. I had to shake my head and admit that American system leaves a very bad impression. 

Medicare Supplements, which are offered by private insurance companies, but closely regulated by Medicare, will see the following changes.

1. Plans E, H, I and J will be eliminated.
2. Plan G will be modified. Home Care benefit will be removed and excess charges covered at 100%.
3. Lower cost Plans M and N will be offered. Co-pays will be included in these new plans.
4. Companies offering Plan A must offer Plan C and Plan F.
5. A hospice benefit will be included in all new plans being introduced.

All companies will be allowed to reset rates with the introduction of new plans and the addition of the hospice benefit. Companies with high premiums that are no longer competitive will be able to reset their pricing creating more competition between supplement companies. This should make for an interesting Medicare Supplement market in 2010.

Medicare Supplements fill the "gaps" in Medicare and are also known as "Medigap plans". If a person buys a Plan F, they will have almost all of their medical costs completely covered, as Medicare will pay first and the Medigap plan will pay the balance. Of course, not all services are covered by Medicare, and the Medigap plan only pays when Medicare pays.

When asked how Medicare can cut costs, President Obama has a standard response, and he uses it every time the question is asked.  He says overpayments to Medicare Advantage plans, or "subsidies to private insurance companies", will be cut. These cuts will save billions of Medicare dollars over five years. 

Cuts in payments to the private insurance companies running Medicare Advantage plans will start in 2010. The companies got the bad news back in March and had to determine how they would change their plans' benefits for 2010.  Enrollees in these plans won't learn of any changes until October when they get a packet of information from their plan sponsor. Only then will we know how the private insurance companies have reacted to 2010 payment cuts. And only then will the 23 percent of Medicare beneficiaries who are enrolled in Medicare Advantage plans know how it all affects them.

 Some History

People on Medicare have the option of enrolling in privately-run health insurance plans, known as Medicare Advantage plans. In 2009, the government is paying these pri­vate plans an average of 14 percent more than it would pay for people in "Original Medicare". "This added cost contributes to the worsening long-range financial stability of the Medicare program," according to the Medicare Payment Advisory Commission (MedPAC), a nonpartisan group that monitors Medicare.

 In 2009, 23 percent of all Medicare beneficia­ries (about 10.4 million out of the 45 million people in Medicare) are enrolled in Medicare Advantage plans.  In some states, like California, Arizona, Pennsylvania, and Oregon, over 30 percent of Medicare beneficiaries have enrolled in these private plans.

Enrollment in Medicare Advantage more than doubled after the introduction of the Part D prescription drug plan in 2006.  That year, all seniors were encouraged to sign up for the drug plan or face a penalty for delayed enrollment. Part D drug plans were offered by the same companies offering Medicare Advantage plans, most of which included the prescription drug plan for no cost. With Part D stand-alone plans costing between $10 and $50 per month, many seniors were attracted to zero premium Medicare Advantage plans that included Part D.  

 Most Medicare Advantage enrollees are in health maintenance organizations (HMOs) in which members are limited to a network of health care providers in certain areas. Since 2006, the fastest-growing Medicare Advantage option has been private-fee-for-service (PFFS) plans, which al­low members to go to any provider who is willing to bill the insurance company without having a contract with that company. These plans were designed to operate much like Medicare, which is a "fee-for-service" plan. Private fee-for-service plans are not re­quired to have a network of providers, although this will change in 2011.

 All Medicare Advantage plans are required to offer at least the same benefits that traditional Medicare offers. But they have become increas­ingly popular because they frequently offer ben­efits not covered by traditional Medicare,  such as vision, hearing, and dental care; health club memberships; preventive care.

 Below are some examples of Medicare Advantage enrollment by state. The numbers are the percentage of Medicare beneficiaries enrolled in Medicare Advantage.

 More information can be found on the Kaiser Family Foundation web site (kff.org) on the Medicare Advantage Tracker page. Data is provided on the number of Medicare beneficiaries as well as the average amount private insurance companies are paid per month per enrollee in each state.  Monthly payments by Medicare to insurance companies range from $1,013  in Florida to $726 in Vermont per enrollee.

While the various health insurance reform bills in Congress are being loudly debated, it appears the changes that are coming soon to Medicare Advantage plans are flying under the radar.  Some companies will pull out of the Medicare Advantage market, requiring seniors to find a new plan. Other companies will increase co-payments and perhaps raise premiums. Many plans now have no premium, which has been a major selling point for cash-strapped seniors and Medicare beneficiaries on Social Security Disability.  October should be interesting when the details of 2010 Medicare Advantage plans are released.

Elaine is a friend of mine in Rhode Island who is 80 years old. She had seen the advertisements on television for AARP's Medicare Supplements. When she talked to her friends they said they had supplements to fill the gaps in their Medicare coverage, so Elaine called AARP to sign up for their Medicare Supplement policy which would cost her $175/month. 

I was visiting Elaine last summer and the topic of Medicare came up, so I asked Elaine what coverage she had and asked to see her Medicare-related cards.  When Elaine went through her wallet she pulled out not one, but two cards that said AARP on them.  One was for a Medicare Supplement and one was for a Medicare Advantage plan - both from AARP.

I was puzzled and so was Elaine.  Which coverage did she have? Elaine wasn't sure herself, but she knew she had called AARP three months earlier to sign up for the Medicare Supplement policy (at a cost of $175/month). So, even though it was Saturday, I called 1-800-MEDICAR and asked the question, "What do you see in Elaine's Medicare record that shows if she is covered by "Original Medicare" or a "Medicare Advantage plan?".

The answer from the Medicare representative was that Elaine was in the AARP Medicare Complete plan (which is a Medicare Advantage plan that includes a Part D drug plan). I asked if Elaine's Medicare Supplement policy would work with Elaine's Medicare Advantage plan. (I knew the answer but wanted the Medicare Rep to tell Elaine.) The answer was that a Medicare Supplement only works when a person is on "original Medicare". The "Med Supp" covers the gaps in Medicare - but when a person signs up with a Medicare Advantage plan (some call them "Medicare Replacement plans"), the plan pays their bills, not Medicare.  Therefore, Elaine's AARP Medicare Supplement was "useless".

"Let's call AARP."

So, with Elaine's Medicare coverage clarified, I called AARP to find out how Elaine got signed up for a Medicare Supplement and was paying $175/month for a useless policy. The AARP representative said all callers are asked "if they have coverage already and are switching to AARP coverage".  When I asked if customers are required to answer more specific questions about their "coverage", the AARP rep said that was not part of the phone interview.

So, what was Elaine to do?  Her friends all had Medicare Supplements, so Elaine thought she should have one too. But, as it turns out, Elaine had no choice but to keep the Medicare Advantage plan because there is a "lock-in" for people in these plans. This conversation was taking place in July and Elaine could not change her Medicare Advantage plan until January. She could make changes as of November 15th and they would take effect on January 1.

I told Elaine to cancel the Medicare Supplement policy and to ask AARP to refund the premiums she had paid. Medicare Supplement policies can be cancelled at any time - but Medicare Advantage plans and Part D Drug plans can only be cancelled at the end of the year.

I supposed I am biased when it comes to advising people against signing up over the phone for something as important as Medicare coverage. I have met several seniors who thought the AARP Medicare Supplement would cover the co-payments in their Medicare Advantage plan - and when they called the AARP phone number, they were signed up without questions being asked about what kind of coverage they had.

I'm an insurance agent working with Medicare Supplements and Medicare Advantage plans.

I got a call the other day from a client who is 88 years old.  He had received a mailing from friends in Georgia that was 11 pages of misinformation about President Obama's healthcare/health insurance reform plans.  My client, who has been enrolled in a Medicare Advantage plan for many years, had read that private Medicare plans would be eliminated, and he wondered what that would mean for him and his wife. 

I talked to Cecil and his wife for 45 minutes, trying to assure them that their Medicare coverage will not be taken away. And I explained to them that Medicare is a government program (and a bit of a socialist program), but that they had a choice to be covered by a private Medicare plan (Medicare Advantage). We went round and round on this information as they did not want to believe that Medicare is government-run. 

They had copied the materials for me and I did not look closely at them until I had left their house.  As I read the 11 pages I was amused and distressed by the idiocy of the misinformation that was being circulated. It is funny and pathetic, but it is disgusting that seniors are being targeted by fear-mongering, anonymous groups that want to stop reform at any and all cost.

 The authors of the pieces seemed to be the "Fairbanks Republican Women Federated" (www.frwf.net) and "The San Diego Republican Congressional Team", though all of the pages seemed to be assembled in amateurish fashion.  The first page I saw, with no author noted, provided "Critical Facts about ObamaCare".  It says "America's Affordable Health Choices Act of 2009" will:

*"Seek to eliminate employer and private insurance plans beginning in 2013."

*"Restrict care for the elderly, regulate hospice, and control end-of-life decisions."

*"Penalize with fines any citizens who do not participate; increase taxes on citizens and businesses."

*"Empower the new Health Care Administration to monitor all medical records and personal information."

*"Give preference to certain identity groups with an Office of Minority Health."

Then there was the much-circulated "detailed analysis" of HR 3200, which is called "Obama's Healthcare Plan".  No need to list all the whacky misinformation, but here are a few:

*"Page 29: Your health care will be rationed!"

*"Page 30: A government committee will decide what treatments and benefits you get (and unlike an insurer, there will be no appeals process)."

*"Page 65: Taxpayers will subsidize all union retiree and community organizer health plans (read: SEIU, UAW, ACORN)."

The Fairbanks Republican Women Federated page says, "What can you do?" and offers suggestions such as writing and calling your Congressman as well as:

*"Contact your insurer and your primary care physician and let them know you do not want government-run health care."

*"Boycott companies such as Wal-Mart that support the bill."

*"Circulate this page to everyone you know."

Seniors are easy targets for fraudulent marketing, but this type of misinformation campaign may be the most despicable I have ever seen. As an insurance agent I'm trying to look at all sides of the healthcare debate.  But when I see lies and distortions from groups like the Fairbanks Republican Women, I put them in the same category as conmen who prey on seniors.  They should be called out for their lies and their targeting of easily-frightened seniors.