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I work for a MA "special needs" plan (one that serves people who have BOTH Medicare and Medicaid) so anything affecting Medicare Advantage plans directly affects me on my job. As such, I am kept well informed about changes in the heal th care reform act would affect MA plans. There has been so much rumors and scare tactics used by those opposed to health care reform and Obama haters out there that sorting out fact from fiction can be impossible. The AARP site has excellent information in a very readable format that gives the facts on how health care reform would affect MA plans. Contrary to what the Obama haters have been saying, the president does not want to kick private companies out of Medicare.
All MA plans must tell CMS (Center for Medicare and Medicaid Services, the government agency that administers Medicare and Medicaid) by July any benefit changes proposed for the next calendar year and those benefit changes have to be made public in October. For 2011, most plans will not have major changes. However some plans will have some major changes and some plans would be exiting many markets. This would happen regardless of health care reform and is a normal part of conducting business.
One major difference between the government and a private business is that government MUST serve everyone everywhere and cannot go out of business. A private company can choose which markets to serve and can go out of business, be merged and sold to another company while the government cannot. Instabiity is a hallmark of private business. It is rather ironic that those conservatives who constantly rail about "big government" and tout "free markets" at the same time bemoan the fact that Medicare Advantage plans are private companies that are part of a free market and subject to the market instability.
With the passage of the Medicare Modernization Act in 2003, private companies offering benefits to Medicare beneficiaries were paid an additional 14% above the original Medicare. That bill also changed the name of the program from Medicare + choice to Medicare Advantage. The earlier Medicare + choice had seen many companies exit the program after the balanced budget act in 1997 reduced payments to those plans. As a result of this new change, many new plans entered the market and existing plans expanded their markets to take advantage of that extra payment.
The additional payment was placed there so MA plans could offer additional benefits to Medicare beneficiaries like dental and vision benefits. However I really believe that was put in the bill by health insurance lobbyists along with other provisions and then passed by a republican congres very friendly to the health insurance and pharmaceutical lobbies. Basic dental and vision benefits are relatively inexpensive to add to any benefit program and the cost of those benefits can easily be covered elsewhere by the plan.
What I saw from many MA plans was that many offered zero premium plans with low co-payments and deductibles as an enticement for people to enroll. I also saw many plans pay generous commissions to their sales representatives to sign up new members. Since 2004, many of those zero premium plans with low deducaibles and co-payments have had to impose or increase premiums or reduce benefits to stay solvent. Some have had to reduce payments to medical providers and as a result their networks have shrunk. Many plans have since pulled out of some markets where they weren't as profitable or have been merged into larger plans. In addition many plans have reduced the commissions that they pay to their sales reps.
What will happen is that the larger MA plans from large companies will still be around. However the day of the "zero premium" plan may have ended except for "special needs" plans. Expect higher deductibles (especially for hospital inpatient admissions) and co-payments from other plans. Some plans may drop some additional benefits or restrict dental and vision benefits some. One benefit that may be dropped by many plans is the health club memberships. For many plans that is an underutilized benefit that very often does not show an immediate bottom line result.
Well run MA plans that do not over pay their executives will continue to thrive. Those MA plans that emphasize care management of chronic conditions and are very proactive in preventative care with a focus on keeping their members as healthy as possible will also thrive. The greatest advantage of belonging to a MA plan is that most well run MA plans do a very good job of managing and coordinating care for chronic conditions. This prevents over medication and makes sure that the treatments are effective and working. Those plans also make sure that the primary care doctors, specialists, pharmacists and others involved in patient care are communicating with each other. It also helps prevent and detect fraud and abuse. That also avoids unnecessary treatments for the patient and in many instances leads to better patient outcomes.
There has been much discussion about the president's push for comparative effectiveness in how doctors practice. Many people do not fully understand that approach and as a result consider that as a form of rationing of health care. Well, some of the best run MA plans have been using that approach for years and as a result are doing very well financially. Expect to see more of this from MA plans.
My belief is that when you look at how Medicare Advantage plans operate, you are looking at the future of health insurance in the USA under health care reform. MA plans are monitored constantly and watched very closely by CMS. Our marketing compliance manual is six inches thick. Violations of the rules can result in sanctions against any MA company (one in Florida that was caught cherry picking was kicked out of the program) or a marketing rep. As a marketing rep, any contact I have with a Medicare beneficiary has to be logged in and any event where I am in contact with potential members has to be reported to CMS. CMS monitors our activities all the time and they use "secret shoppers" to try and detect any non compliance. I don't mind that since this levels the playing field. I can still make a decent income while serving the people.