Americans above the age of 65 and people with certain long-term disabilities under the age of 65 are eligible to receive health insurance benefits through the Medicare program, which includes traditional Medicare and Medicare Advantage. Traditional Medicare is operated by the federal government, while Medicare Advantage (MA) plans are operated by private insurers who contract with Medicare and are regulated and reimbursed by the federal government. Beneficiaries can enroll in one of the two programs.
A quick breakdown of Medicare benefits:
- Part A covers inpatient hospital stays, hospice care, and skilled nursing facilities.
- Part B covers services from physicians, preventative and diagnostic care, and durable medical equipment.
- Part C (Medicare Advantage) provides the services covered under parts A and B, and often Part D.
- Part D covers prescription drugs.
Enrollment in MA, as a share of total enrollment in the Medicare program, has more than doubled since 2007, which is concerning for a few reasons. First, private insurers advertise MA plans, which offer Parts A and B, and often Part D and dental and vision care, as a simplified way for beneficiaries to shop for health insurance. While these consolidated plans offer lower premiums than traditional Medicare, the premiums are lower because insurers limit provider networks and care utilization, which also limits enrollees’ quality of care. Second, MA enrollment is increasing more quickly for racial minorities than for other demographic groups. Since MA enrollees receive more limited care compared with enrollees in traditional Medicare, the rise in MA enrollment has exacerbated existing health disparities along racial lines. Finally, Medicare Advantage costs the federal government $300 more per enrollee than traditional Medicare while offering less robust coverage, which is particularly problematic as Medicare faces insolvency by 2028.
Limited Provider Networks, Pre-Authorization Requirements, and Denials of Care
According to a Government Accountability Office (GAO) report, over one-fourth of Medicare Advantage plans had “health-biased disenrollment,” or a disproportionate rate of sick patients leaving their plan. Of patients who left a plan with health-biased disenrollment, 41% stated that their preferred provider was not in their network under Medicare Advantage, and 27% reported difficulty receiving needed care.
Almost 60% of Medicare Advantage plans are Health Maintenance Organization (HMO) plans. These plans offer a limited number of in-network providers, and patients treated by out-of-network providers must pay the total cost of their care. Comparatively, traditional Medicare enrollees can access any doctor or hospital nationwide that accepts Medicare, which is almost every hospital and most providers. Having virtually open access to providers ensures that enrollees in traditional Medicare can receive care from necessary experts and specialists. This access is especially valuable since enrollees in the Medicare program tend to have more significant healthcare needs than the general population.
Nearly all Medicare Advantage enrollees are in plans that require prior authorization for high-cost and preventative services. A KFF publication shows that over 90% of enrollees are in plans requiring prior authorization for durable medical equipment (hospital beds, walkers, or oxygen used in home-based care), skilled nursing facilities, acute hospital care, and diagnostic procedures. In addition, over 80% of enrollees were required to obtain prior authorization for physical and speech therapy, diabetes treatment, and substance abuse treatment.
An Office of the Inspector General (OIG) review of Medicare Advantage Organizations (MAOs) found that 13% of claims denied in the pre-authorization process actually met coverage criteria and that MAOs denied claims by using additional clinical criteria not listed in the plan and stating that patients provided insufficient information to justify their claims. Consequently, some patients were denied coverage for necessary treatments.
These denials and delays of needed care have a devastating impact on beneficiaries. In a 2021 American Medical Association (AMA) survey, 34% of doctors reported that prior authorization requirements had led to “hospitalization, disability, or even death, for a patient in their care,” and 93% reported that necessary patient care had been delayed due to excessive wait times during the authorization process. In contrast, traditional Medicare rarely requires prior authorization for services (durable medical equipment in short supply being one exception), which allows patients to make healthcare decisions with their doctors rather than their insurers.
Racial and Economic Disparities in Enrollment
There are also significant disparities along racial and economic lines between enrollment in traditional Medicare and Medicare Advantage. At least half of all Black and Hispanic Medicare beneficiaries have enrolled in Medicare Advantage, compared with 36 percent of white beneficiaries. In other words, Black and Hispanic enrollees are disproportionately enrolled in plans that narrow provider networks and are more likely to deny coverage for needed care. While high costs disproportionately impact Black enrollees in the overall Medicare program, these issues are most pronounced for Black enrollees in Medicare Advantage. Thirty-two percent of Black enrollees reported cost-related problems in Medicare Advantage compared to 24% in traditional Medicare. Additionally, among Black beneficiaries who self-identified as being in poor health, only one-third of enrollees in traditional Medicare reported cost-related problems, compared to half of enrollees in Medicare Advantage.
Medicare Advantage Costs More for the Federal Government and Threatens the Solvency of the Medicare Program
The federal government pays over $300 more per enrollee for Medicare Advantage beneficiaries (through vouchers) than for beneficiaries of traditional Medicare, which amounted to $7 billion in increased spending in 2019 alone. The most recent Board of Trustees for Medicare annual report projects that Medicare will reach insolvency within the next decade, meaning that the Medicare Trust Funds will not have enough money to cover expected patient costs. In sum, Medicare Advantage jeopardizes the longevity of the overall Medicare program.
Policy proposals to strengthen Medicare
- Consolidate enrollment and premiums for Parts A and B coverage: Medicare Advantage often appeals to beneficiaries because enrollment is simpler than traditional Medicare. Consolidating enrollment and payments for traditional Medicare would improve the experience for beneficiaries and attract more enrollees.
- Expand premium assistance for low-income beneficiaries: Raising the federal income threshold to qualify for premium assistance would reduce the number of people in a coverage gap who have lower incomes but do not currently qualify for assistance to pay their premiums. This would encourage beneficiaries to enroll in traditional Medicare who could not afford to do so otherwise.
- Streamline prior authorizations and enhance transparency in Medicare Advantage: The lack of regulations on prior authorizations allows private insurers to unjustly deny beneficiaries’ claims. The Centers for Medicare and Medicaid Services (CMS) has proposed a rule that would require Medicare Advantage plans to: make timely pre-authorization decisions, notify beneficiaries of the decisions, and publish yearly metrics of pre-authorization decisions.
- Rename Medicare Advantage: The “Save Medicare Act” would rename Medicare Advantage to the “Alternative Private Health Plan” and prohibit companies from using the name “Medicare” in plans or advertisements. This would help to reduce confusion among beneficiaries and highlight that Medicare Advantage plans are offered by profit-driven private firms rather than the federal government.
These policy changes would improve the enrollment process for traditional Medicare and reduce the cost burden for lower-income individuals, encouraging more beneficiaries to enroll and improving their access to quality healthcare. At the same time, further regulations on Medicare Advantage plans are necessary to protect existing enrollees. Policies to streamline the prior authorization process would prevent unnecessary wait times and denials of patient care. These reforms would help to ensure that the Medicare program fulfills its original promise to provide comprehensive, affordable care for seniors and people with disabilities.
About the Author
Jenna Pelly is a Senior Online Editor for GPPR and second-year Master of Public Policy student at Georgetown. She is pursuing a career in health policy to improve access to quality and affordable health care in the United States. Prior to attending Georgetown, Jenna obtained her BA in Psychology from Duquesne University and worked on clinical trials at the University of Pittsburgh and Johns Hopkins University.
