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Study: Low-Income and Minority Populations Use Medicare Advantage Plans

SEPTEMBER 20, 2005 -- Many low-income and minority populations rely on Medicare Advantage plans because they are more affordable and include benefits not found in Medicare's traditional fee-for-service program, according to a new study released Tuesday.

The report, compiled on behalf of the BlueCross BlueShield Association, also found that Medicare Advantage plans reduce Medicaid costs when "dual eligibles," individuals who qualify for both Medicare and Medicaid, enroll in Medicare Advantage plans. Without Medicare Advantage, the study estimates that Medicaid costs would increase by $792 million annually and roughly $4 billion over five years.

Medicare Advantage plans are private health care plans offered to Medicare enrollees. As part of the new Medicare drug law (PL 108-173), many private insurers are expected to offer Medicare beneficiaries an array of health care services that go beyond traditional fee-for-service coverage, such as prescription drugs.

According to the study, 40 percent of African American and 53 percent of Hispanic beneficiaries without Medicaid or employer coverage rely on Medicare Advantage, as compared with 33 percent of non-Hispanic, white beneficiaries. The study also found that the plans had wide appeal to low-income beneficiaries, with 36 percent of Medicare eligible beneficiaries with incomes below $10,000 annually and 38 percent of those with incomes from $10,000 to $20,000 without Medicaid or employer coverage enrolling in Medicare Advantage plans.

In 2005, Medicare Advantage plans will provide Medicare beneficiaries with $3 billion in supplemental benefits at no additional cost to the beneficiary, or an annual average of $615 per Medicare Advantage enrollee net of premiums paid by beneficiaries.

Without Medicare Advantage in place, two million beneficiaries would lose supplemental coverage and would rely on Medicare alone for their health benefits, researchers found. As a result, the percentage of Americans without any supplemental coverage would increase by 32 percent. Ethnic minorities would be especially hard hit—the number of African-Americans without any supplemental coverage would rise to 59 percent, the study found.

"It is clear that low-income and minority populations rely heavily on the Medicare Advantage program," said Kenneth Thorpe, professor and chair of the Department of Health Policy & Management at Emory University, who conducted the study with colleague Adam Atherly. "Because these programs are often affordable and include benefits not found in traditional Medicare, many with lower incomes depend on it," Thorpe said in a news release.

Any attempt to scale back the Medicare Advantage program, as some Democrats and other opponents of the drug bill have urged, could hurt low-income Medicare beneficiaries and increase Medicaid costs, company officials said Wednesday.

"We're very concerned about the potential for cuts," said Alissa Fox, vice president of legislative and regulatory policy. The study released Tuesday should help Congress "see how much low-income beneficiaries benefit" from Medicare Advantage, she said.

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