As Medicare Advantage plans approach their 25th birthday — the law that created the current system allowing private health care providers to offer a one-stop-shop alternative to original Medicare was signed by President Bill Clinton in 1997 — they have become an integral part of the program. Today, an estimated 42 percent of Medicare recipients are enrolled in an MA plan, and experts project the majority of beneficiaries may get their medical coverage through one by 2030.
The growth of MA plans is linked closely to the founding idea of Medicare: Provide older Americans with the same kind of health insurance coverage they got when they were working. For the first 20 years of the program, original Medicare did just that by offering plain-style health insurance in which doctors and hospitals simply got paid for services rendered. But as health maintenance organizations (HMOs) and preferred provider organizations (PPOs) came on the scene in a big way during the 1980s and ’90s, more Americans became accustomed to getting care through a single, all-encompassing health care network. That led to the creation in 1997 of Medicare Part C — first called Medicare+Choice and now Medicare Advantage.
Ever since, most Medicare enrollees have had a decision to make: Choose pay-per-service health insurance under original Medicare or become a member of an MA plan that gets paid a lump sum by the federal government to provide all your care. In 2005, 13 percent of enrollees chose the MA option, and the growth has been steady ever since; enrollment in Advantage plans rose 10 percent between 2020 and 2021 alone.
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One reason for this growth is all the extra benefits MA plans provide — but which Congress has not yet allowed original Medicare to offer. For example, many MA plans tout gym benefits plus some dental, vision and hearing care. And in recent years, government officials have given the plans permission to offer transportation to doctor appointments, modifications to beneficiaries’ homes such as wheelchair ramps, and even carpet cleaning to help people with respiratory problems.
AARP is lobbying Congress to allow original Medicare to offer similar benefits to its enrollees, as is the Center for Medicare Advocacy, which stated in a March report that “there is a growing imbalance between Medicare Advantage and traditional Medicare ... relating to the scope of coverage.”
Another selling point of MA plans is their one-stop-shopping experience, says Tricia Neuman, senior vice president of the Henry J. Kaiser Family Foundation (KFF). In contrast, original Medicare enrollees wanting prescription drug coverage must shop for a private Part D plan, and many also choose to buy a supplemental or “Medigap” insurance policy to cover health costs not covered by Medicare. They also need to consider buying separate dental and vision care policies, she says.
Neuman also points to the aggressive marketing of MA plans. From NFL Hall of Famer Joe Namath to former sitcom star Jimmie “J.J.” Walker, celebrities are routinely endorsing MA plans in TV ads touting all their extra services at no increase to your usual Part B premium.
“Traditional Medicare doesn’t really market,” Neuman says.
Although Medicare Advantage is obviously popular with consumers, a full report card on it has to look at its macro-level goals, such as providing superior health care to older Americans while saving taxpayers money. And at that level, the jury is still out. Here is a look at MA plans today from several important angles.
The MA consumer experience
Being in an MA plan is very different from getting your care under original Medicare.
If you are enrolled in original Medicare and you need a doctor, you can go to any provider in the United States who has signed up to treat Medicare patients. If you need to see a specialist or go to a hospital, you can pick whomever or whichever you want, as long as they participate in the program. You control general oversight of your health care, though you have the option of using a primary care physician to help guide your choices.
MA plans mostly come in one of two approaches. HMOs typically have closed panels of doctors who often practice together in one location; usually your care will be entirely coordinated by that medical group. If you go outside the HMO’s staff for health care, the plan likely won’t pay for it. If you want to see a specialist — say, a cardiologist to thoroughly check out your heart health — you typically need your primary care doctor to give a referral to a specialist within the HMO.
PPOs are a little looser than HMOs, but they still have restrictions. You’ll likely have a list of professionals within the PPO that you must choose from, but you won’t need a gatekeeping doctor to preapprove seeing a specialist. Still, you may have to get more pre-authorizations for procedures or tests than under original Medicare. Some PPOs do let their members get outside care, but you’ll usually pay much more for it.
Quratulain “Annie” Syed, M.D., is an Atlanta geriatrician who has taken care of patients via both original Medicare and MA plans. She’s sold on MA. These plans give practitioners “more ability to innovate the care, compared to the standard practice,” Syed says. She points to the emphasis on preventive care by MA plans, their ongoing communication with members and the free transportation that some plans offer. Together, these offerings increase the chance of enrollees seeing their doctors more often. Patients who visit her only once or twice a year bring “a whole laundry list of problems,” Syed says.
The extra benefit aspect in MA plans has roots in the 1980s. But the benefits proliferated after 2003, when Congress deemed that if MA plans were able to provide medical care to members for less than what Medicare paid them, the extra money should be put toward either providing extra services or cutting patients’ costs.
Sheereen Aarif first got on Medicare in 2006, when a heart condition disabled her. She was on original Medicare, but when she moved to be with her sons in Douglasville, Georgia, an adviser suggested she consider an MA plan. The 69-year-old retired engineering technician is glad she did.
The main reason she switched, Aarif says, was the transportation benefit. Her cardiologist is 45 minutes from where she lives. “My children work, and I have no way of getting around. I don’t drive.” She couldn’t continue to afford the Lyft costs. Now her plan offers her five round-trip rides each year.
Aarif was also pleased to find out that the MA plan would keep tabs on her annual screenings and even whether she exercised. And her physical activities came with a bonus. “I went to the senior center before COVID and did exercises and line dancing. We got points for that.” Those points, it turned out, were convertible into a gift card that the plan sent her just in time to do Christmas shopping.
About 40 percent of Humana’s 4.9 million MA plan members have the transportation benefit, according to company spokesman Jim Turner. But do enrollees use such offerings? MA plans do not generally report this data, but Turner said that about 18 percent of those who joined Humana in 2021 had already used their over-the-counter drug discount cards through July — a benefit not offered by original Medicare. And about 80 percent of Humana members who are dually eligible for Medicare and Medicaid (the federal-state health program for those with low income) use the Healthy Foods Card, which provides qualifying members with a $75-a-month food allowance.
United Healthcare, the nation’s largest provider of Medicare Advantage plans (many of which carry the AARP brand), says its “Medicare Advantage plans go beyond traditional health care services to try to help address the issues outside the doctor’s office that impact people’s health, such as food security, housing, transportation and social support.” Another example: United and other MA plans have begun offering programs that provide members the ability to have licensed medical staff come to their home.
The question of care
Extra benefits aside, some experts cite a potential downside to the restrictions in MA plans: members’ limited choices for specialist doctors or hospitals. This comes into play particularly when there is a need for a more serious or unique treatment for health issues ranging from cancer to joint replacements; patients in an MA plan often don’t have the option to go to a top-grade but out-of-network research hospital or specialist unless they are willing to pay far more of the costs themselves.
A 2021 report by the Government Accountability Office looked at whether people with complicated health issues may not be as satisfied with MA plans. The report found that “beneficiaries in the last year of life disproportionately disenrolled” and went back to original Medicare. The report also said that such moves “increased Medicare spending by hundreds of millions of dollars.” The reason: While the government pays MA plans a flat rate to care for enrollees, original Medicare pays health care providers directly for services rendered, and people near life’s end often generate huge amounts of medical costs. Medicare pays for hospice care for people near the end of life, whether in original Medicare or an MA plan.
David Lipschutz, associate director of the Center for Medicare Advocacy, says that while some studies show MA plans do better when it comes to preventive care, other studies show “people who are sicker tend to disenroll at a higher rate than those who are not sick. That is, to me, very telling.”
Alicia Jones, director of the State Health Insurance Assistance Program (SHIP) in Nebraska, says that in her experience, people who have had a history of serious illnesses will more often opt for original Medicare with a Medigap policy because they want predictability when it comes to costs. “They like to know exactly what they are going to be spending,” she says. A Medigap policy “might be a little more expensive, but it does mean you know exactly every month what it’s going to cost.” Roughly 34 percent of original Medicare enrollees buy supplemental Medigap coverage; another 29 percent of enrollees get supplemental coverage through an employer-sponsored retiree benefit.
Under MA plans, there may be copays and other out-of-pocket costs that are less predictable. That said, MA plans have a cap on annual out-of-pocket costs (in 2021, that was $7,550).
At the Medicare Rights Center, there have been several common themes to the complaints received from beneficiaries over the past decade, says Casey Schwarz, the advocacy group’s senior counsel for education and federal policy. “More people who call because they are dissatisfied with their MA plan largely have complaints about affordability, about networks, about denials,” Schwarz says. “For example, they may have low out-of-pocket costs when they have relatively few health care needs. But if they become sicker, their out-of-pocket costs can be larger.”
Often the most pressing concern Schwarz’s counselors hear about, she says, is from consumers who want to switch out of an MA plan because they want to see a doctor who is not in their plan’s network.
But switching from an MA plan to original Medicare can be tricky. The federal government basically gives beneficiaries a yearlong tryout period with MA. If you’re not happy with your plan within the first year, you can switch to original Medicare and still be guaranteed eligibility for a Medigap plan.
But if you’ve been in an MA plan for longer than a year and choose to switch to original Medicare, in most states Medigap plans can charge you more — or refuse to sell you a policy — if you have a health issue.
The big-picture goals
The federal government assesses MA plans through a five-star quality bonus program that rates them based on 40 performance measures. These range from health screening availability and patient satisfaction to how quickly plans respond to denial of care appeals. Plans have an incentive to do well in these categories because those that get at least four stars typically get bonus payments from Medicare. In 2021, about 80 percent of MA plans got at least four stars; some critics suggest this means the quality measures are not stringent enough.
“By some measures, the program has been wildly successful. But from our perspective, we also look at whether Medicare Advantage is achieving its full potential with respect to the Medicare program as a whole,” says James Mathews, executive director of the Medicare Payment Advisory Commission (MedPAC), which Congress established to analyze the program and provide advice. His organization believes the method Medicare uses to grade MA plans “fails utterly.” The commission has urged Congress to scrap the current system in favor of one that would better evaluate how well plans meet patient needs.
Chiquita Brooks-LaSure, the new administrator of the Centers for Medicare & Medicaid Services (CMS), which runs Medicare, told AARP in an interview that “it is the responsibility of CMS to continue to make sure that plans are living up to their role, and we certainly will be looking at our regulations, and our guidance, to make sure that we are holding the plans to the standards that they should meet.” But Brooks-LaSure wouldn’t say if she thinks the quality rating system for Advantage plans should be reformed, as MedPAC recommends.
Does MA save money?
While MA plans dispute this, MedPAC said in a 2021 report that taxpayers have not financially benefited from the program over the past two decades. “The Commission estimates that Medicare currently spends 4 percent more per capita for beneficiaries enrolled in MA than it spends for similar enrollees in traditional fee-for-service Medicare,” the report states.
Mathews explains how this happens: Each year, MA plans give the government their bids that reflect how much they think it will cost them to deliver care to members. Though the bids say they provide medical care for an average of 87 percent of what it costs fee-for-service Medicare, the formula the government uses to pay nets those plans 104 percent of the fee-for-service costs. Under MedPAC’s June recommendations, Medicare would pay MA plans closer to parity with original Medicare costs per beneficiary. That would save the program $10 billion over five years.
Medicare Advantage plans say the MedPAC calculations are based on flawed assumptions. Mark Hamelburg, senior vice president at America’s Health Insurance Plans, a trade association for the health insurance industry, says the group’s calculations show that not only have MA plans been able to bid to provide care at less than what it cost Medicare for the original program, but “the actual dollars out the door have been less.”
But a blog post from MedPAC disputes the trade group's analysis, saying: “MedPAC continues to find that Medicare pays more for beneficiaries enrolled in MA, compared to similar beneficiaries" enrolled in fee-for-service coverage.
Will the two choices continue to coexist?
In interviews, Mathews and Brooks-LaSure made clear that neither MedPAC nor CMS intends to advise beneficiaries on which option is better. And other experts say there is no one-size-fits-all conclusion about which type of Medicare coverage Americans should choose.
Brooks-LaSure told AARP that she believes both original Medicare and MA “need to be viable options for people so that they can decide on their own which one makes the most sense for them.” What is clear is that enrollment in MA plans is likely to continue rising. A Congressional Budget Office analysis projects that by 2030, 55 percent of Medicare beneficiaries will be enrolled in MA plans.
Congress is considering proposals to fund new benefits for original Medicare that would level the playing field. But other differences, particularly the cap on out-of-pocket costs, likely mean that MA plans will continue to increase in popularity. “It’s quite possible,” says KFF’s Neuman, “that based on current trends, Medicare will be looking more and more like a marketplace of private plans.”
Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the “Medicare Made Easy” column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for the Orange County Register and as a health policy and workplace writer for Newsday.