Human Services News

Families USA:

When lawmakers added private plans to Medicare, they claimed that such plans would save money and provide better care.

Proponents of these plans, now called "Medicare Advantage" plans, argued that because they would foster "coordination of care" and inject the "efficiency of the private market" into Medicare, these plans would result in savings for taxpayers and better health care for beneficiaries.

While proving to be very lucrative for insurance companies, who have since increased their enrollment and thus their profits, this change has come at a high cost to taxpayers, and it has weakened the Medicare program as a whole.

According to the Medicare Payment Advisory Commission (MedPAC), Medicare Advantage plans are paid an average of 12 percent more than traditional Medicare to provide the same care.

In spite of the rapid growth in Medicare Advantage plans over the past few years, traditional Medicare is still overwhelmingly the choice of seniors: 80 percent of Medicare beneficiaries choose traditional Medicare over private plans.

Source: Families USA calculations based on America's Health Insurance Plans, Center for Policy and Research, Low-Income & Minority Beneficiaries in Medicare Advantage Plans (Washington: AHIP, February 2007).

This rush to attract lucrative new members has led to numerous illegal and unethical marketing practices.

These marketing abuses ranged from beneficiaries being provided with misleading information about a plan's network to the forging of seniors' signatures.18 Although marketing abuses have been reported across all Medicare Advantage plan types, they have been the most egregious among PFFS plans.19 With high payment rates and complicated plan structures, these plans epitomize the potential harm of combining substantial incentives to insurers and their agents with plans that lack necessary consumer protections and appropriate oversight.