TV ads don't tell the full story behind high out-of-pocket costs for Medicare Advantage plans

By Joseph Burns

In December, we wrote about Medicare Advantage (MA) plans and the television advertisements that touted their benefits. We warned that out-of-pocket costs could rise sharply if an MA member gets sick or injured.

But one angle in that story didn’t get enough coverage: The trouble any seniors in MA plans would face they wanted to disenroll in their MA plan to get more suitable coverage. Although we noted that my AHCJ colleagues Liz Seegert, who writes about aging, and Cheryl Clark, who reports on patient safety, have covered this topic well, health care journalists can and should do more reporting on this troubling aspect of Medicare Advantage.

Here’s why: Seegert reported in a tip sheet that MA plans often mislead consumers, and Clark explained for MedPage Today that getting out of an MA plan is more difficult than getting in. What’s more, Clark cited two physicians who criticized MA plans, saying Medicare should not let anyone with serious health risks enroll in an MA plan. And, she added, some critics say, “MA across the board is basically a scam.”

The TV commercials don’t tell us that it’s impossible for anyone turning 65 to predict their future health costs accurately. All we know is that whatever state of health we might enjoy in our early to mid-sixties, our costs will rise and our health will decline over time. This angle to the MA story deserves more than we’re giving it, if for no other reason than to serve as a counterpunch to the misleading TV ads that run during Medicare’s annual open enrollment period (October 15 to December 7) and continue now during Medicare’s general enrollment period (January 1 through March 31).

Those ads are so effective that, as KFF showed in a recent report, enrollment in MA plans has doubled in the past decade, reaching 24.1 million people as of last year, or 39% of the nation’s 62.0 million Medicare members. In each of the past two years, enrollment in MA plans rose by about 2.1 million members.

As these numbers suggest, MA plans are attractive to seniors because most enrollees (89%) in MA plans also had a prescription drug-plan (called an MA-PDP or MA-PD), and 60% of those members paid no premiums for their plans except for the standard Medicare Part B premium that was $144.60 in 2020, KFF reported.

Most seniors in MA plans receive benefits that traditional Medicare does not cover, such as eye exams, glasses, dental care, fitness programs and hearing aids, KFF showed. As former football star Joe Namath suggests on TV, such low premiums and added benefits are attractive to all seniors.

But those ads fail to note that MA plans are best for seniors who are mostly healthy and thus may not need to use the health care system much. Also, they don’t mention that out-of-pocket costs (meaning copayments, deductibles and coinsurance) are rising. Last year, the average out-of-pocket limit was $4,925 for in-network care and $8,828 for both in-network and out-of-network services in preferred provider plans, KFF said. This year, those limits are higher.

“For 2021, the maximum out-of-pocket amount for seniors in Medicare Advantage plans is $7,500 for in-network care and $11,300 for in and out of network services combined,” says Trudy Lieberman, a past president of AHCJ and health journalist. She has covered Medicare since the 1980s.

“To entice people to enroll in MA plans, the federal government has allowed MA insurance companies to offer attractive benefits such as meal deliveries after a hospital visit,” she adds. “But those heavily advertised goodies obscure one big drawback of those plans: a high out-of-pocket maximum that wasn’t mentioned in any of the TV ads I saw.

“That’s why it’s important for anyone with a chronic condition to know that covering the 20% gap in Medicare can be costly,” Lieberman explains. Traditional Medicare generally covers 80% of hospital and physician services costs, leaving that 20% gap for seniors to pay.

One way seniors can cover that 20% is to choose a Medigap policy in which benefits are standardized but vary somewhat among plans. The federal Centers for Medicare and Medicaid Services explains in Medicare & You 2021, the official US government Medicare handbook that there are 10 types of Medigap plans: A, B, C, D, F, G, K, L, M and N.

“The Medicare & You report also notes that Medigap plans C and F were no longer available to seniors who were newly eligible for Medicare on or after January 1, 2020,” Lieberman noted. “That’s because Congress wanted to discourage people from buying plans that paid almost all of their expenses. Instead, they wanted people to have more ‘skin in the game’ by paying more out of pocket to reduce Medicare spending.

“As a result, the best plan seniors can buy is Plan G, which covers excess charges, leaving many people with virtually no out-of-pocket costs,” she explained. “That protection is crucial, which is why so many people, including Medicare experts, have Plan G.” An example of excess charges would be the balance bills that doctors or other providers send out after Medicare pays.

“With health insurance, all consumers pay one way or another, and the tradeoff usually comes in the form of paying a higher monthly premium and less out of pocket when you get sick, or a lower premium and sometimes shelling out a lot more when you accumulate bills through the year,” Lieberman added.

For journalists, it’s important to know that the rules governing enrollment in Medigap plans vary by state under what’s called guaranteed-issue rights. Some states have more generous guaranteed-issue rules than other states. Still, no state can have fewer guaranteed-issue rights than those required under federal law, said Sarah Murdoch, director of client services for the Medicare Rights Center. The center has an overview of Medigap plans and a tutorial on Medigap enrollment periods and guaranteed-issue rights.

KFF also has a report on the guaranteed-issue rules: “Medigap Enrollment and Consumer Protections Vary Across States.” In all but four states (Connecticut, Maine, Massachusetts, and New York), a senior on Medicare can be denied a Medigap policy if he or she has a pre-existing condition, except at certain times and under specific circumstances, the KFF researchers noted. The same report shows that one in four seniors with traditional Medicare had a Medigap policy in 2015.

In their analysis of federal law and state regulations, KFF added that only those four states require Medigap insurers to sell policies to all Medicare beneficiaries ages 65 and older either continuously during the year or at least one month each year. “In all other states and the District of Columbia, insurers may deny a Medigap policy to seniors, except during their initial open enrollment period when they start on Medicare, or when applicants have other specified qualifying events, such as the loss of retiree health coverage,” KFF reported.

Seniors need to carefully make coverage decisions because anyone enrolling in those 46 states and DC could miss the chance to buy a Medigap policy if their needs or priorities change later in life or switch to traditional Medicare after being in an MA plan for several years. Those seniors in traditional Medicare who miss the chance to buy a Medigap policy could then be liable for high out-of-pocket costs.

Check out what what Clark wrote about one MA member and long-distance runner who had a mild stroke and a heart-valve repair then learned that his health care costs would be much higher if he remained in his MA plan or tried to switch out.

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