As the US population continues to age, older individuals are seeking out comprehensive, affordable care options that meet their specific health needs. Medicare Advantage is one of the most popular ways for consumers to round out their healthcare coverage as they age.
Traditional Medicare has consistently played a critical role in providing health coverage for those 65 and older, helping them pay for a wide range of services, including hospitalizations, physician visits, preventive services, and hospice care.
While original Medicare has plenty to offer, a market for high-performing, quality private health plans has emerged, giving insurers an incentive to provide optimal, reasonably priced coverage in the form of Medicare Advantage (MA) plans.
Medicare Advantage plan competition is heating up in 2019, with more than 400 options set to hit the market in the coming months.
The Kaiser Family Foundation (KFF) states that as of 2018, one in three Medicare beneficiaries is enrolled in a Medicare Advantage plan.
But what is Medicare Advantage, and how does it work? What do payers need to know in order to succeed in this increasingly competitive market, and how can they ensure that they offer beneficiaries the best possible coverage?
WHAT IS MEDICARE ADVANTAGE?
According to CMS, Medicare Advantage plans are an all-in-one alternative to original Medicare. MA plans are offered by Medicare-approved private companies.
Sometimes called Part C plans, these bundled plans include Medicare Part A (hospital services), Medicare Part B (medical insurance), and usually Medicare prescription drug coverage (Part D).
Beneficiaries can choose from several types of Medicare Advantage plans, with Health Maintenance Organizations (HMOs) and local Preferred Provider Organizations (PPOs) accounting for the majority of total Medicare Advantage enrollment.
Members also have their choice of private fee-for-service plans, in which the plan determines how much beneficiaries will pay for care; as well as special needs plans, which tailor benefits, provider choices, and drug formularies to specific populations.
Each of these plans is required to have a certain number of providers for 26 medical specialties, along with hospitals and other providers within a particular distance of beneficiaries.
The Medicare Advantage market has grown significantly over the last few years. In October 2018, KFF reported that 34 percent of Medicare beneficiaries, or 20.4 million people, were enrolled in Medicare Advantage plans in 2018 – a major increase from 2017.
“Between 2017 and 2018, total Medicare Advantage enrollment grew by about 1.5 million beneficiaries, or 8 percent – a nearly identical rate of growth compared to the prior year,” KFF said.
“The Congressional Budget Office projects that Medicare Advantage enrollment will continue to grow over the next decade, with plans including about 42 percent of beneficiaries by 2028.”
KFF added that there are more Medicare Advantage plans available in 2019 than in any other year since 2009.
“Nationwide, 2,734 Medicare Advantage plans will be available for individual enrollment in 2019 – an increase of 417 plans since 2018. The average beneficiary will be able to choose among 24 plans in 2019, up from 21 in 2018,” the organization said.
Kaiser Permanente, Blue Cross Blue Shield (BCBS) of Minnesota, and Anthem Blue Cross were among the top rated and highest performing Medicare Advantage health plans in 2018.
Cigna, Humana, Aetna, and UnitedHealthcare have also recently receivedquality CMS ratings.
Member enrollment also tends to be concentrated among these firms: KFF states that in 2018, UnitedHealthcare and Humana together accounted for 43 percent of all Medicare Advantage enrollees, while BCBS affiliates accounted for another 15 percent.
Aetna, Kaiser Permanente, Wellcare, and Cigna made up 21 percent of member enrollment in that year.
WHO IS ELIGIBLE FOR MEDICARE ADVANTAGE?
In general, individuals 65 and older can join a Medicare Advantage plan if they meet three criteria:
- They live in the service area of the plan they want to join
- They have Medicare Parts A and B
- They don’t have end-stage renal disease
The open enrollment period for Medicare Advantage and Medicare prescription drug coverage extends from October 15 through December 7 each year.
During this time, beneficiaries can decide whether they want to change from original Medicare to a Medicare Advantage plan, or they can switch from one Medicare Advantage plan to another.
During a separate enrollment period, from January 1 to March 31, beneficiaries can also switch Medicare Advantage plans, or disenroll from Medicare Advantage and return to original Medicare. However, beneficiaries cannot switch from original Medicare to Medicare Advantage during this period.
WHAT DO MEDICARE ADVANTAGE PLANS COVER?
Medicare Advantage plans must cover all the services that original Medicare covers, CMS states. Original Medicare will also cover the cost of hospice care and some costs for clinical research studies for Medicare Advantage beneficiaries. Medicare Advantage members are always covered for emergency and urgently needed care.
However, each Medicare Advantage plan can charge different out-of-pocket costs, and can have different rules for how beneficiaries receive services. These rules can include whether beneficiaries need a referral to see a specialist, or whether members have to see in-network doctors, facilities, or suppliers for non-emergency care.
While Medicare Advantage plans can choose not to cover the costs of certain unapproved or elective services, beneficiaries can appeal the decision. Beneficiaries or their providers can also request to see if an item or service will be covered by a plan in advance.
CMS also notes that most Medicare Advantage plans may offer extra coverage, such as dental, vision, hearing, and health and wellness programs.
Members will usually pay a monthly premium for Medicare Advantage and a monthly Part B premium.
Premiums under Medicare Advantage are undergoing a steady decline, CMS recently reported, with the average 2019 Medicare Advantage premium decreasing from $29.81 to $28.00. As of 2019, the average Part B premium is $135.50, or higher depending on the member’s income.
Out-of-pocket costs in a Medicare Advantage plan depend on whether plans charge a monthly premium or whether plans pay any of the monthly Part B premium.
Out-of-pocket costs will also depend on whether members need extra benefits and whether the plan has a yearly deductible or any additional deductibles. Plans have a yearly limit on out-of-pocket costs for beneficiaries, so once members reach a certain limit, they pay nothing for additional covered services.
CMS notes that individual Medicare Advantage plans, rather than Medicare, determine how much beneficiaries pay for covered services. The amount members pay for premiums, deductibles, and services may change only once a year, on January 1.
HOW DOES MEDICARE ADVANTAGE RELATE AND COMPARE TO ORIGINAL MEDICARE?
Beneficiaries who choose to join a Medicare Advantage plan still have Medicare, CMS notes, and Medicare pays a fixed amount each month to the companies offering Medicare Advantage plans. Private companies offering Medicare Advantage must follow rules set by Medicare.
When deciding between original Medicare and Medicare Advantage, beneficiaries should carefully review and consider the details of both plans. Depending on an individual’s health, budget, and acceptance of financial risk, Medicare Advantage could prove more or less beneficial than original Medicare.
For example, Medicare Advantage plans tend to have a more limited network of providers than traditional Medicare plans. A 2017 study from KFF showedthat 35 percent of Medicare Advantage beneficiaries were in plans with narrow physician networks. These plans offer enrollees access to less than 30 percent of physicians in a county.
However, for those who take prescription drugs, Medicare Advantage may be the better option. Original Medicare doesn’t cover the cost of prescription drugs unless members also enroll in Medicare Part D.
In contrast, drug costs are often covered under Medicare Advantage plans. KFF previously reported that 88 percent of Medicare Advantage plans offered prescription drug coverage in 2017.
Medicare Advantage plans also provide out-of-pocket spending caps, and some offer dental and vision coverage, while traditional Medicare plans do not.
HOW CAN PAYERS ADD MORE VALUE TO MEDICARE ADVANTAGE PLANS?
While the Medicare Advantage market has grown considerably in recent years, research has suggested that these plans can leave consumers feeling less than pleased.
In 2018, JD Power found that Medicare Advantage consumer satisfaction scores dropped from 799 in 2017 to 794 in 2018. The survey revealed that plans were failing to communicate effectively with members and to ease financial burdens for Medicare Advantage enrollees.
“Efforts to help beneficiaries better manage and reduce out-of-pocket spending associated with their care and coordinating care between providers are some of the most powerful drivers of satisfaction, yet few plans fully deliver on that capability,” Valerie Monet, Senior Director of the Insurance Practice at JD Power, said at the time.
In order to engage consumers and stand out in an increasingly competitive environment, payers may need to implement new strategies and approaches in Medicare Advantage plans.
Increasing personalized communication
Tailoring communication efforts to individual beneficiaries could increase member engagement. A recent HealthMine survey found that 60 percent of Medicare Advantage enrollees feel that plans aren’t doing enough to inspire personal health improvements.
With many beneficiaries living with one or more chronic conditions, payers should pay attention to modifying communication and engagement techniques to fit each individual’s specific lifestyle and health needs.
To achieve this, payers can use digital channels, such as email and text messaging, to connect with patients and provide them with resources that could improve their health.
Payers can also leverage these technologies to help beneficiaries choose an appropriate Medicare Advantage plan. Under a rule passed by CMS in 2018, payers are able to promote new, digitized member engagement strategies.
“CMS noted that more sophisticated approaches to consumer engagement and decision making should help beneficiaries, caregivers, and family members make informed plan choices,” the agency said.
Using data to enhance social determinants benefits for members
The social determinants of health play a critical role in overall health and wellness. Particularly in older and vulnerable populations, the conditions in which people live, work, and socialize can have significant effects on physical wellbeing.
To improve Medicare Advantage benefits, payers can use existing health plan information to target individual and community factors that may contribute to poor health. Major payers have launched programs to implement community-level changes.
Humana’s Bold Goal initiative, for example, seeks to improve the overall physical and mental health of its Medicare Advantage members by targeting factors such as food insecurity, housing instability, social isolation, and limited English proficiency.
“As the US population ages, we need to support their needs as well as the nurses, physicians and caregivers who are providing direct services and care,” said Bruce D. Broussard, Humana’s President and CEO.
“Our Bold Goal has helped us understand the needs of our members and communities better.”
Customizing pricing for Medicare Advantage plans
Affordability is a major concern for all healthcare consumers, and may be particularly challenging for older populations. A recent poll from the University of Michigan Institute for Healthcare Policy and Innovation found that 45 percent of pre-Medicare adults are not confident that they will be able to afford healthcare coverage in retirement.
To ease financial strain for those enrolled in Medicare Advantage, commercial payers can capitalize on valuable cost-sharing benefits for enrollees. CMS’s 2018 rule enabled customization of cost-sharing and member deductibles for Medicare Advantage members, which can help reduce costs for beneficiaries.
Harvard Pilgrim’s Stride Medicare Advantage Plan offers prescription drug coverage with $0 co-pays, as well as reduced co-pays for provider visits. Humana also offers Medicare Advantage plans with $0 premiums and no annual deductible. Additionally, Anthem BCBS of Kentucky recently expanded its $0 premium Medicare Advantage plans to 29 counties.
Medicare Advantage has grown rapidly and will continue to expand in the future. The market offers lucrative opportunities for payers, but industry players will need to confront challenges in consumer satisfaction and competition.
To stand out in the Medicare Advantage landscape, payers should examine their capabilities, as well as the specific needs of patient populations, to offer the best possible plans for beneficiaries.