GAO Report: Medicare Advantage Exposes Seniors To Serious Financial Risks

When lawmakers approved the Medicare Modernization Act, they offered an extra subsidy to Medicare Advantage plans (MA). The deal was this: Medicare would pay about 13 to 17 percent more for beneficiaries enrolled in MA Plans, and the plans would, in turn, use the increased payments to offer more benefits, reduce beneficiary cost sharing, and “expand into geographic areas where previously plan options had been very limited.”

It was supposed to be a win-win, or so proponents of MA argued. But in recent months, a trickle of government reports and independent estimates have dampened the rational for subsidizing MA plans. The extra federal dollars don’t improve health outcomes. They pad insurers’ bottom lines, raise costs for beneficiaries in the traditional Medicare program, squeeze both Medicare and the federal budget, and drain resources from more productive uses.

Yesterday, the Government Accountability Office (GAO) released a new report that may very well break the dam of support for subsidizing certain MA plans, pushing President-elect Barack Obama to act on a key campaign pledge and re-establish parity between traditional Medicare fee-for-service and Medicare Advantage plans.

According to the report, Medicare Advantage Private-Fee-For-Service Plans (PFFS) — which are responsible for nearly half of the recent growth in MA enrollment — have exposed beneficiaries to serious financial risks:


Beneficiaries May Be Charged For Entire Cost Of Service: If beneficiaries in PFFS plans did not contact their plans before obtaining services to ensure that the service was covered, they may have had to “pay for the entire cost of the service if the coverage was later denied.” Enrollees in original fee-for-service Medicare are not charged the entire cost of a service unless the provider warns him or her that it may not be covered by Medicare.

Beneficiaries Charged Higher Cost Sharing: PFFS plans charged exorbitant cost-sharing to beneficiaries who did not “prenotify” a plan before obtaining services, a practice that may have violated laws governing PFFS plans. Medicare FFS plans, HMO, and PPO plans did not have prenotification requirements.

PFFS Plans Are Unpopular: Beneficiaries are noticing the poor treatment they’ve received from PFFS plans and are voting with their feet and are disenrolling at an average rate of 21 percent compared to 9 percent for other MA plans. The Center for Medicare and Medicaid Services did not comply with statutory requirements to mail information on MA plan disenrollment rates to beneficiaries.