While Medicare Advantage (MA) plans are marketed as providing more generous benefits than traditional Medicare (TM), differences in the financial burden between beneficiaries switching to MA and staying with TM, are minimal, a longitudinal cohort analysis found.
In fact, according to a study by Sungchul Park, PhD, a health economist at Korea University in Seoul, and colleagues, the estimated annual out-of-pocket spending when switching to MA was $168 higher than staying in TM. That amounted to a 10.5% relative increase based on baseline out-of-pocket spending of $1597 annually among switchers, ranging widely, however, from a $133 decrease to a $469 increase. And for some, MA enrollment was associated with a higher likelihood of catastrophic financial burden.
“Our findings contrast with the notion that MA’s apparently more generous health insurance benefits lead to financial savings for enrollees,” Dr. Park and associates wrote in Annals of Internal Medicine.
The study
The analysis looked at costs for 7054 TM stayers and 1544 TM-to-MA switchers from the 2014-2020 Medical Expenditure Panel Survey, focusing on a cohort in which 18% of TM-covered individuals in year 1 switched to MA in year 2.
Comparative financial outcome measures included individual healthcare costs (out-of-pocket spending/cost sharing), financial burden (high/catastrophic), and subjective financial hardship (difficulty paying medical bills).
Although the overall out-of-pocket differences for MA were minimal and amounted to less than 1% of total healthcare expenses, MA was associated with a greater financial burden in vulnerable, especially in low-income populations. For every 100 beneficiaries with family incomes below 200% of the federal poverty level, one to six more switchers faced a catastrophic financial burden, with their out-of-pocket costs consuming more than 40% of household income in the year after switching.
The gap between the perception of lower costs and reality may be caused by a substantially heavier cost-sharing burden for certain services in MA plans, Dr. Park and associates pointed out. While MA enrollees generally paid less in some studies than the Part A hospital deductible for TM for inpatient stays of 3 days, they were more likely to face higher cost sharing for stays exceeding 7 days
Furthermore, whereas TM covers home health services without cost sharing, some MA plans have copayments. In addition, out-of-network health services can cost more. MA enrollees paid an average of $9 more for mental health services than for other in-network services and often encountered limited access to in-network providers. According to a 2021 study, only 18.2% of mental health professionals, 34.4% of cardiologists, 50.0% of psychiatrists, and 57.9% of primary care providers were included in MA networks,
An accompanying editorial noted that private MA plans will reap $83 billion in overpayments from U.S. taxpayers this year, according to Congress’s Medicare Payment Advisory Commission.
And as the data from Dr. Park and colleagues reveal, switchers don’t get much financial protection, according to primary care physician and healthcare researcher Steffi J. Woolhandler, MD, MPH, and internist David U. Himmelstein, MD, both of City University of New York at Hunter College in New York City.
“Medicare Advantage looks good when you’re healthy and don’t need much care. But when you need coverage, it often fails, leaving you with big bills and narrow choices for care,” Dr. Woolhandler said in an interview.
So how do these findings square with insurers’ hard-sell claims and enrollees’ perceptions that MA cuts out-of-pocket costs? “The likeliest explanation is that MA insurers have structured their benefits to advantage low-cost (that is, profitable) enrollees and disadvantage those requiring expensive care,” the editorial commentators wrote. For beneficiaries on inexpensive medications, MA plans would be a financial win. “But for patients requiring expensive chemotherapies, the 20% coinsurance that most MA plans charge could be financially ruinous.”
Commenting on the study but not involved in it, David A. Lipschutz, JD, LLB, associate director of the Center for Medicare Advocacy in Washington, DC, called the study an important one that provides more evidence that significant overpayments to MA plans don’t translate to better financial protections for plan enrollees, particularly lower-income individuals. “While there has been some recent movement to hold plans more accountable for providing necessary care, much more impactful action by policymakers is required to mitigate the harms of the growing privatization of the Medicare program,” he said. “MA overpayments could be redistributed to traditional Medicare in order to enrich all Medicare beneficiaries instead of just insurance companies.”
This study was supported by the National Research Foundation of Korea. Dr. Park disclosed no competing interests. One study coauthor reported support from government and not-for-profit research-funding bodies. Editorialists Dr. Woolhandler and Dr. Himmelstein had no competing interests to declare. Dr. Lipschutz disclosed Medicare advocacy work.