Taking Stock of Medicare Advantage: Choice

Background

This year, the average Medicare beneficiary will choose from among 39 Medicare Advantage plans, the highest number in a decade. While a dozen rural counties still have no plans, in certain U.S. markets there are more than 50 plans available. But are beneficiaries able to choose the plan that’s best for them?

The health economists and Medicare experts we spoke with said choosing among plans can be difficult, even for the savviest consumers. First, beneficiaries must opt out of traditional Medicare, then choose a plan type (such as HMO or PPO) and determine what premium levels, copayments, and other parameters meet their needs. Many callers to the help lines run by State Health Insurance Assistance Programs — which most beneficiaries don’t make use of — are confused by basic insurance terminology.

It also can be hard to use Medicare’s Plan Finder to figure out which providers participate in which plans.¹ And unlike choosing among Medicare Part D plans, which must cover drugs in all classes, Medicare Advantage plans can differ significantly. For instance, they can offer extra benefits beyond the required Medicare package, like vision or dental coverage, meal delivery, or caregiver support.

Given all this, the experts agreed that most beneficiaries aren’t making informed or active decisions. Instead, many choose plans based on advertising, word-of-mouth, or brand loyalty, then stay with those plans year after year, even if another plan would better serve their interests.

Health and Financial Consequences

The consequences of not making informed choices are significant. One study found some Medicare Advantage beneficiaries paid up to $1,000 more annually for plans that didn’t offer any more generous benefits or a wider network of providers than cheaper plans. Initially attracted by low premiums, enrollees may fail to notice when a plan exposes them to high costs for hospitalizations or rehab stays — events that may not happen frequently but certainly aren’t unusual in the Medicare population.

When faced with high out-of-pocket costs, some people skip care and jeopardize their health. One study found that when people were defaulted into Part D plans that didn’t cover the drugs they need, many simply stopped taking their medications.

Making It Easier to Choose Wisely

The experts we talked to suggested several ways that beneficiaries could make informed choices, often by following best practices in other industries or other health insurance markets. These include:

• More robust oversight of plan and marketing communications. The Centers for Medicare and Medicaid Services (CMS) could audit plans’ provider directories and penalize those with inaccurate information. And brokers who take commissions from carriers could be required to clearly state this relationship upfront.
• Standardizing and curating plans. In 2019, CMS lifted requirements that had previously limited insurers from introducing new plans in a county unless those plans had “meaningful differences” from other plans they already offered there. Some experts say this rollback has led to a proliferation of new plans that add to beneficiaries’ difficulty with making informed choices. As a remedy, CMS could limit the number of plans each carrier can offer or require some standardization, such as in copayments for selected services.

A few experts suggested CMS could go further. By actively curating plans, for example, the agency could kick out plans that don’t appear to offer value or meet performance metrics. A forthcoming study (in the Review of Economic Studies) in Oregon’s school districts showed that when some employee benefit managers limited the choices available to workers — offering only plans that provided the best value, on average — those workers ended up with better-value plans than their counterparts who had been allowed to choose from all available plans.

• Strengthening public reporting on plan quality and variation. The public reporting features of Medicare Advantage’s star-rating system, which tracks plan quality, are too simplistic for differentiating plans, the experts agreed. They called for research to determine which plan elements seem to make people healthier and more satisfied. For example, why do many beneficiaries leave Medicare Advantage and go back into traditional Medicare toward the end of life? One expert, citing evidence some patients prefer and may fare better with providers who share their racial or ethnic background, suggested beneficiaries should be able to pick plans based on factors such as how many Black or Hispanic physicians are in network. Other experts suggested CMS could more clearly advise plans on what they should be doing to keep people healthier and provide high-value care.
• Experimenting with defaults. Even with the best decision supports, some people will still not make active choices. Given this, the experts suggested CMS could experiment with default systems that choose the best plans for beneficiaries based on medical conditions and past utilization patterns. But such default systems, they caution, would need to be conservative and allow beneficiaries to opt out.
• Keeping beneficiaries’ options open. States or the federal government could substantially enhance beneficiary choice by requiring insurers that sell Medigap policies — the private coverage that many people buy to defray the cost of coinsurance in the Medicare fee-for-service program — to offer plans to all beneficiaries, cover preexisting conditions, and not charge more based on past or present health conditions. (This is now required in a handful of states and in certain circumstances.) Without such requirements, people wishing to switch from Medicare Advantage to traditional Medicare and purchase a Medigap plan may be subject to medical underwriting that renders them unable to purchase or afford such a plan.

Moving Forward

In addition to new guardrails for beneficiaries, the federal government could give Medicare Advantage plans incentives or mandates to be proactive in helping enrollees understand their benefits, some experts said. For example, along with getting the annual notices that alert them to plan changes, enrollees could receive customized communications from their plan explaining the changes in simple terms. These messages could say something like, “We know you’ve seen Dr. Smith this year, but she is no longer in our network,” or “You paid $25 copays for each of your five specialty visits this year. These copayments will go up to $75 next year.”

As the Medicare Advantage program continues to grow, changes like these will be needed to ensure that its enrollees are able to make informed choices that deliver value for them and for the government.