Reform the Medicare Private Health Plan Marketplace

When it comes to choosing a health care plan, most people with Medicare decide to stay with Original Medicare, which is administered by the government.

But about 20 percent decide to get their Medicare benefits through Medicare private health plans (such as an HMO or PPO), also called Medicare Advantage plans. These plans are required to cover the same services as Original Medicare but have different rules, costs and coverage restrictions.

Private plans generate big profits for insurance companies, but the higher costs are borne by the US government – or, in other words, by taxpayers like you. On average, the government pays private insurance companies 12.4 per cent more per enrollee than it would cost Original Medicare to insure the same individuals.

If subsidies for private plans were pegged to costs under Original Medicare, taxpayers would save more than $150 billion over the next ten years!

Why do people enroll in private plans? Well, some seem to offer more generous benefits than Original Medicare, and look like a good deal. But private insurance is a for-profit business, and the market has been flooded with hundreds of different plans – and this rush has led to marketing fraud and the sale of plans that have high hidden costs.

There is no real data on the benefits people actually receive from the so-called Medicare Advantage plans as opposed to what they were promised. However, based on the thousands of calls for assistance that we receive at the Medicare Rights Center and research by the Government Accountability Office, the Medicare Payment Advisory Commission and other independent experts, it’s safe to say that private health plans frequently fail to deliver the benefits they promise.

Year after year, Mr. and Mrs. W would join a Medicare HMO, only to watch it leave the county, forcing them to scramble to find new health coverage. After six years, the W’s left their fifth and last HMO voluntarily when it wrongfully denied Mr. W coverage for a heart operation, falsely claiming that he had not received prior authorization.

Today the couple has Original Medicare, and say that they would never go near an HMO again. “We just couldn’t afford it, and the service was terrible!”

As a taxpayer, you are paying the bill for the Medicare private health plans, while the profit goes into the pockets of private insurance companies.

If we could reduce government overpayments to those private insurance companies, the savings could be used to meet other health care goals, such as helping low-income people with Medicare afford their medical care and prescription drug costs.

If you’re enrolled in a Medicare private health plan, then you have a personal stake in this issue. As long as you’re relatively healthy, you may be satisfied with your benefits under a private plan. But if you have more serious health problems, you may find that you have higher out-of-pocket costs than you expected—and higher costs than you would have under Original Medicare.

The Medicare Rights Center believes that Congress should pass legislation that ends the government’s overpayments to Medicare private health plans and ensures that all plans meet minimum benefit standards and are easy for consumers to understand.

The government must also be tougher on companies that are guilty of deceptive marketing. At present, the hands of the state insurance departments are tied and they cannot hold companies responsible for the actions of their agents. And the federal Centers for Medicare & Medicaid Services lacks the expertise and manpower to adequately police private companies.

As a concerned citizen, you can act for change in Congress. Take action now!

And while we work for system reform, we’re still here to help you with your Medicare questions and problems. Don’t hesitate to call our Consumer Hotline today!

Read about the most recent developments on this topic in Asclepios or learn more from the materials provided below.

April 7, 2020 Letter to Congressional Leadership on Medicare Advantage

October 16, 2007 Testimony of Paul Precht before the House of Representatives Committee on Ways and Means Subcommittees on Health and Oversight: “Statutorily Required Audits of Medicare Advantage Plan Bids”

Informed Choice: The Case for Standardizing and Simplifying Medicare Private Health Plans, September 2007

Medicare Private Health Plans vs. Medicare Savings Programs: Which is the Better Way to Help People with Low Icomes Afford Health Care? September 2007

September 11, 2007 Testimony of Pia Allocca before the National Association of Insurance Companies

The Reluctant Regulator: Centers for Medicare and Medicaid Services; Response to Marketing Misconduct by Medicare Advantage Plans, July 2007

Too Good to be True: The Fine Print in Medicare Private Health Plan Benefits, April 2007

After the Goldrush: The Marketing of Medicare Advantage and Part D Plans, January 2007