Medicare Advantage Benefits, Cost-Sharing Requirements Vary Greatly, Says Report

The benefits and cost-sharing requirements of the Medicare Advantage plans that serve 10 million Americans vary widely from plan-to-plan with little explanation for the variance, a new Kaiser Family Foundation study finds.

The analysis—Medicare Advantage 2010 Data Spotlight: Benefits and Cost-Sharing—examines trends in benefits and cost-sharing for Medicare Advantage plans, including HMOs, PPOs, and private fee-for-service plans, and found that:

• Medicare Advantage enrollees could pay between zero and $3,325 for a five-day inpatient hospital stay, depending upon where they live and the plan they select.
• Average cost-sharing for some Medicare-covered services has increased rapidly between 2008 and 2010 among Medicare Advantage plans—up 18% for an average stay in a skilled nursing facility and up 36% for an average inpatient hospital stay.
• In 2010, about four in five Medicare Advantage plans set an annual limit on enrollees' out-of-pocket spending, providing protection from catastrophic costs that traditional Medicare does not provide. However, 31% of all plans have limits above the $3,400 level recommended by the Medicare program and 21% have no limit.
• Nearly half of 2010 plans provide some coverage in the "doughnut hole" for Medicare's drug benefit—28% cover generic drugs only, and 21% cover generics and some brand-name drugs.

Robert Zirkelbach, spokesman for America's Health Insurance Plan, says he doesn't "know enough about the report to dispute it."

"The key point is that Medicare Advantage plans across the country provide a variety of options for seniors to choose from," he says. "The data show that the overwhelming majority of seniors are satisfied with the coverage they are getting from their Medicare Advantage plans. They are benefitting from benefits and services that aren't available in the traditional Medicare program."

Marc Steinberg, deputy director of health policy at Families USA, says the study "really shows how Medicare Advantage is a very uneven program and one that where there is quite a bit of waste and risk for consumers."

"I'm sure there is some reason for their pricing, but it's not one that most beneficiaries or even analysts can understand. It's a very difficult program for people in Medicare to understand. It's hard to understand what you are getting, when you will get it, and under what circumstances," Steinberg says.

A Medicare Payment Advisory Commission report to Congress last March showed that Medicare Advantage, on average, cost 14% more per beneficiary than traditional Medicare. Steinberg says the new KFF study likely will renew criticism that Medicare Advantage is a windfall for the health insurance industry.

"The system as currently structured is clearly designed to promote the private health insurance industry for its own sake," he says. "That is not to say there aren't good plans out there that provide high-quality services at reasonable costs. But the payment system that is in place today, that was most recently revised in 2003, was designed to promote any and all private plans, regardless of what is efficient. There is no effort to reward quality or efficiency. It's just money for money's sake."

However, Zirkelbach says studies have shown that Medicare Advantage delivers higher quality of care and customer satisfaction than traditional Medicare, in part because of additional programs, such as disease management and care coordination plans.

Steinberg says the new programs and benefits that Medicare Advantage offers often are designed to attract healthier people.

"So they will add things like vision tests, which is nice, but they will make up for that by raising the costs for things like inpatient hospital stays or skilled nursing facilities and that way the plans become less attractive for sicker people and more attractive for healthy people," Steinberg says. "That is a troubling trend for all of Medicare. You end up with a system where the sicker people stay away from these plans, and with good reason. But then you have to ask 'are these plans doing what they were designed to do, which was to provide high quality and affordable care for everyone?'"