Benefit Bulletin: December 2019

Benefit Bulletin: December 2019

President Trump Signs Executive Order to Expand Private Medicare Plans

By Rick Delaney, Chairman of the Board

President Trump recently signed an executive order intended to change Medicare by expanding the role of Medicare Advantage — the private insurance alternative to Medicare.  Medicare Advantage plans have been growing in popularity in recent years enrolling about one third of the nation’s 61 million Medicare enrollees.

The executive order directs the Department of Health and Human Services to develop proposals that would expand plan options, encourage innovation in plan designs and payment models, and improve the enrollment process to make it easier to choose plans.  It includes a variety of proposals that include combating waste, fraud and abuse in the program, and improving access to new treatments and medical devices.

Medicare Advantage plans are popular in many areas of the country for low, (or even no) monthly premiums, having an annual out-of-pocket maximum, and for offering supplemental benefits not currently covered by Medicare, such as dental and vision coverage.  Most Medicare Advantage plans also provide prescription drug benefits.

The plans also reduce spending on premiums, because they eliminate the need for supplemental insurance.  While the majority of Medicare beneficiaries still receive their Medicare benefits through traditional Medicare, many also purchase a Medicare supplement or “Medigap” policy to cover the considerable amount of out-of-pocket spending that Medicare alone does not cover, and a free-standing Part D drug plan.

There are important trade-offs to Medicare Advantage.  Enrollees must use the network of hospitals and doctors who contract with the plan.  In recent years as enrollment grows, more plan enrollees have been hit with surprise bills for out of network providers —often for thousands of dollars.  While traditional Medicare is accepted by any willing doctor in every state, Medicare Advantage coverage tends to be accepted only in a specific geographic area.  There are also more requirements for prior approval for certain procedures.

Access to the plans is highly variable.  While some areas of the country have dozens of Medicare Advantage plans, rural counties often have very limited choices, or as little as just one insurer.  Frequently, older and sicker enrollees discover that Medicare Advantage plan out-of-pocket spending due to chronic health conditions, or a hospitalization can be much higher than with a Medigap plan.  Medigap supplements cover most, or even all, out of pocket costs.

Most troubling, in October we reported that Medicare Advantage plans have overcharged Medicare by almost $30 billion in recent years.  Officials know that some Medicare Advantage plans exaggerate how sick their patients are by inflating the “risk scores” in order to collect higher payments from Medicare, yet the federal government has recovered only a tiny percentage of the overpayments to private insurers in the past.

Over the years, TSCL surveys indicate that older Americans overwhelmingly oppose totally replacing Medicare with a system of private insurance plans.  On the other hand, the design of traditional Medicare alone has a considerably high level of out-of-pocket spending, and no annual out-of-pocket limit.  That leaves an important role for private insurers to fill in the gap with Medigap supplements or Medicare Advantage plans.

While most retirees tend to want to hold onto their current supplement or health plan, concern about rising costs is universal.  TSCL’s 2019 Senior Survey found that more than 75% of survey respondents favor the establishment of a cap on the maximum percentage of profit that private insurers may earn.

TSCL is working with Members of Congress to enact legislation that would lower Medicare costs, including the elimination of “surprise medical bills” from out-of-network providers, and is working to ensure that Medicare beneficiaries can continue to receive their Medicare benefits through the Medicare Advantage or Medigap plan of their choice.

What do you think about expanding the role of Medicare Advantage plans?  Visit us at and send us your comments.