Medicare Advantage Plans replace Part A, Part B and Medigap

March 21, 2009
Medicare Advantage Plans replace Part A, Part B and Medigap

By Peter Laird, MD

Medicare Advantage plans are the latest target of alleged government excess, greed and wasted resources justifying the need to overturn this system for that of a comprehensive national health care plan. The data sited shows the costs differences between these various Medicare Advantage plans and Medicare Part A, Part B.

The GAO Finds Fault With Medicare Advantage

The program is a political football. Though it was originally envisioned as a potential way to save the Medicare program money, the government pays on average 13 percent more to care for a Medicare Advantage enrollee than it would if that person were in traditional Medicare. This report only fans the flames of critics who maintain that the government is getting little bang for its buck. "Overpayments fatten company profits, even as many seniors face higher costs in MA plans than they would in traditional Medicare," said Rep. Pete Stark (D-Calif.), chairman of the House Ways and Means Subcommittee on Health, in a press statement following the report's release.

However, what I have not heard in any of the articles on the alleged excesses of Medicare Advantage plans is that they not only incorporate a capitated payment system for Part A and Part B, but they also incorporate internally the advantages of Medigap coverage into one single payer system as well:
2009 Choosing a Medigap Policy (Page 6) (pdf link)

Medicare Advantage Plans and Medigap Policies

Important: If you have a Medigap policy and you are switching from Original Medicare to a Medicare Advantage Plan, you don’t need and can’t use the Medigap policy to cover deductibles, copayments, or coinsurance under the Medicare Advantage Plan. You may choose to drop your Medigap policy, but you should talk to your State Health Insurance Assistance Program (see pages 49–50) and your current Medigap insurance company before you do because you may not be able to get it back. If you already have a Medicare Advantage Plan, it is illegal for anyone to sell you a Medigap policy unless you are switching back to Original Medicare.

Thus, any comparisons between Medicare and Medicare Advantage must take Medigap (Pays the 20% copay of Medicare Part A and B) into consideration as well instead of the improper comparison of Medicare Advantage with only Part A and Part B of Medicare:
Medigap (Supplemental Insurance) Policies

A Medigap policy is health insurance sold by private insurance companies to fill the “gaps” in Original Medicare Plan coverage. Medigap policies help pay some of the health care costs that the Original Medicare Plan doesn’t cover. If you are in the Original Medicare Plan and have a Medigap policy, then Medicare and your Medigap policy will pay both their shares of covered health care costs.

Insurance companies can only sell you a “standardized” Medigap policy. These Medigap policies must all have specific benefits so you can compare them easily.

The specific benefits of Medicare Advantage programs for CKD-5 patients whether on PD, dialysis or transplant, is that these capitated rates can lead to internal cost savings not available to the Part A, Part B separation in traditional Medicare. In my Southern California Kaiser HMO for instance, we have a 16% system wide mortality statistic for our CKD-5 patients on dialysis and PD. Although there is much room for improvement in many individual units, not only does the Kaiser Senior Advantage program realize internal cost savings between the segments covered in Part A and Part B, but there is also a significant survival advantage just as Bill and others have reasoned would occur when the wall between Part A and Part B vanishes.

I am personally aware of efforts to consolidate best practice outcomes from those units that have achieved 3-7% annual mortality statistics to those that are over 20%. If brought to fruition, best practice implementation system wide could shortly produce results that rival or exceed our best international examples such as Japan with 9% average rates. This would never be possible if Kaiser could not take advantage of internal cost savings inherent in the Medicare Advantage program.

Bill and many others have long called for the removal of the wall between Part A and Part B to fund improved dialysis care to all American patients. I would hope that the success of many integrated health care systems such as Kaiser will not suffer from further short sighted calls to abolish Medicare Advantage programs. The whole story has not been told in the latest articles calling additional benefits “perks”, when in fact they are basic coverages found in Medigap.

I believe that if Part A, Part B and Medigap coverage is compared to Medicare Advantage in responsible HMO’s such as Kaiser, you will find both cost savings and survival advantage in these integrated systems. We need to remember to not throw the baby out with the bath water. Achieving coverage for Part A, Part B and Medigap for only 13 or 14% more than Part A and Part B alone is a cost savings for the entire system since Medigap is designed to cover the 20% not covered by those sections. It is time to compare apples to apples instead of misleading statements intended to disparage a system that is a decided success in the hands of reputable HMO's. The standard is how well they deliver these three separate components and come in under 120% of payments for Medicare Part A and Part B when we correctly consider Medigap as well in the analysis.

http://www.billpeckham.com/from_the_sharp_end_of_the/2009/03/medicare-advantage-plans-replace-part-a-part-b-and-medigap.html