COLUMBIA — Four years ago, Dixon Rogers, who lives in Fayette, was told by the government he could either switch from traditional Medicare to Medicare Advantage, or he could pay a penalty. He needed the coverage for prescription drugs.
A rural resident who gets Medicare because of a disability, Rogers, 59, signed up through Humana in 2005. That was a few months before Medicare started covering prescription drugs as part of former President George W. Bush’s health reform.
These days, he's no great fan of Medicare Advantage, a program in which the government pays private insurers to manage Medicare benefits for members.
“Humana pays for fitness programs and all the fancy stuff; that’s great, but if I have to drive 30 to 40 miles to get that, it’s not great for me,” Rogers said. “Even Columbia is not local to me.”
The end result is that he rarely uses extra benefits that Medicare Advantage plans often offer to attract customers.
When Congress created Medicare Advantage in 1997, the idea was that insurance companies could provide the benefits of traditional Medicare more efficiently and at a lower cost.
Since then, the overall costs for Medicare have skyrocketed for the government, which has led to cost increases for some Medicare recipients.
Health care costs to the government are expected to reach $2.5 trillion this year, according to Centers for Medicare and Medicaid Services. One of the contributing factors to increasing program costs is subsidies paid to health insurance companies.
The Department of Health and Human Services says the federal government pays, on average, 14 percent more to private insurance companies for providing Medicare Advantage coverage than what it pays for other Medicare programs. Because the overall program costs have gotten so high for the government, Medicare Advantage is driving up costs for everyone on Medicare.
"Some of the Medicare Advantage companies are not delivering what they had promised to do in prices," said Prof. Kristofer Hagglund, associate dean of health policy and academic affairs in the MU School of Health Professions*.
The increased costs will translate to an additional $3.60 per month for each Medicare beneficiary in 2010, according to the Department of Health and Human Services, or about $43.20 more for the whole year.
That will affect the 961,308 Missourians on some form of Medicare, according to a report from the Kaiser Family Foundation.
The report attributes the higher Medicare program costs to "excessive government subsidies" that are being given to private insurance companies. The report advocates for elimination of these subsidies.
"Eliminating excessive government subsidies to Medicare Advantage plans could save the federal government, taxpayers and Medicare beneficiaries well over $100 billion over the next 10 years," according to the report, which cited the Centers for Medicare and Medicaid Services.
Because Medicare Advantage subsidies vary by county, there is also concern that some beneficiaries get more benefits than others, Hagglund said.
Another concern is that insurance companies tend to get more from the government than the benefits they provide, he said.
The government pays Medicare Advantage programs by established rates, also known as reimbursement rates.
The rates have varied widely since 1997, and now there is support to reduce reimbursement rates to 100 percent of fee-for-service over several years, which means the government would pay as much for Medicare Advantage plans as it would for traditional Medicare.
The Baucus plan
Eliminating "excessive government subsidies" given to insurance companies for Medicare Advantage has been a dominant focus of the health reform bill proposed by Sen. Max Baucus, D-Mont., and passed by the Senate Finance Committee on Tuesday.
According to an outline of the plan, "overpayments" of government subsidies for Medicare Advantage would be eliminated to reduce overall costs of Medicare.
Eliminating the subsidies is part of an effort to prolong the life of the Medicare Hospital Insurance Trust Fund (Medicare Part A), which the Social Security and Medicare Boards of Trustees expect to be near depletion by 2017.
Eliminating wasteful spending in Medicare Advantage, the plan contends, could sustain the fund for 17 more months.
But the vagueness of where and how much the overpayments are has left many in the health care industry confused, including Teri Kaune, a Columbia recruiter in human resources.
"I'm wondering where they think they're overpaying, unless it's for durable medical equipment or something along those lines," Kaune said. "But I don't believe it's in the hospital setting."
Kaune also said she thinks equipment covered under Medicare Advantage treatment plans can be overcharged by doctors and companies.
"Companies may be billing more than once for the same person," Kaune said. "I think we need to do some more watchdogging on that kind of stuff and make sure we're not overcharging Medicare unfairly."
According to the Centers for Medicare and Medicaid Services, $6.8 billion in "improper" payments were made for Medicare Advantage in 2006.
Baucus said in the Senate Finance Committee's version of the health bill that rebates and bonuses can be excluded from Medicare Advantage prescription drug plans when calculating benchmark amounts for regional low-income subsidies.
If passed, this provision could come into effect in 2011.
Effect on beneficiaries, insurance companies
Complaints about Medicare Advantage in Missouri didn't begin with the recent health care debate. Last year, Sen. Claire McCaskill, D-Mo., led the Senate Special Committee on Aging in Missouri. The committee heard complaints about the program, including some about aggressive marketing that targeted low-income and chronically ill senior citizens.
"We need to understand that elderly people have a wide age range from 65 to 90," said Kathleen Gillespie, associate professor in the department of health management and policy at Saint Louis University School of Public Health.
The medical needs among the age group will vary as well.
Health profiles of Medicare Advantage subscribers is an area of research in itself, Gillespie said.
"But we tend to see healthier people subscribe to Medicare Advantage compared to the traditional Medicare program," she said.
The Kaiser Family Foundation reports that about 185,281 Missourians — 19 percent of Medicare beneficiaries — are currently enrolled in Medicare Advantage, a figure that has increased considerably in recent years nationwide.
The U.S. Government Accountability Office shows increased participation in the private-fee-for-service plan, which has gone from 35,000 in 2004 to about 2.3 million in 2008. That plan is part of the Medicare Advantage program, but beneficiaries are permitted to seek treatment outside a provider network. Total Medicare Advantage enrollment rose from 5.5 million in 2004 to 10.8 million in 2009, according to the Kaiser Foundation.
Carol Beahan, director of Community Leaders Assisting the Insured of Missouri, a nonprofit organization, has taken notice.
"There are more plans available in Missouri than previously," Beahan said. "Mostly Kansas City, Saint Louis and Springfield area, so we have seen a growth of plans throughout the last couple of years made available."
Beahan also said 40 plans are available in Boone County for Medicare beneficiaries.
Medicare Advantage plan benefits vary by company and by individual plan. Every company designs its own benefit packages for each plan it offers. But all the plans are required to provide benefits at least as good as original Medicare.
Each Medicare Advantage provider submits bids for the coming year that must be reviewed and approved by the government.
Medicare Advantage plans often cover extra benefits beyond what is covered by traditional Medicare. Extra benefits might include transportation to medical appointments, free access to fitness centers, lower out-of-pocket costs for longer hospital stays, more preventive care, or better dental and vision coverage than Medicare.
The Baucus bill also proposes to change the way Medicare Advantage bids are structured and approved by the government. There is a concern in the insurance industry that this will not accomplish its goal and might end up being a problem for smaller plans that operate efficiently.
Health insurance companies Humana and HealthSpring declined to discuss the future of Medicare Advantage, citing the uncertainty of the issue.
"We are declining interviews on this topic at this time, given the level of scrutiny plans are under regarding communications about health care reform and the impact of potential rate cuts," HealthSpring spokeswoman Jolene Sharp said in an e-mail.
Rate cuts, a new bidding structure and other proposals under consideration in the Congress could hit the industry hard.
Some companies like UnitedHealth Group, a health plan provider that operates in all 50 states and the District of Columbia, are already experiencing Medicare Advantage cuts.
"While UnitedHealthcare bore the brunt of the Medicare Advantage cuts to its plans for 2010, further funding cuts would make it unsustainable to continue offering Medicare Advantage benefits at their current levels," UnitedHealth Group spokesman Jon Stone said in an e-mail.
Cuts in government subsidies to the private plans might also mean a rise in costs for the elderly, Hagglund said. But they can switch to a different Medicare Advantage plan or to traditional Medicare, he said.
In Fayette, costs have already risen for Rogers.
At the beginning of this year, Humana started charging him $18 a month more, he said.
Rogers said customer service personnel cited a rise in the company's costs and were dismissive of the price increase. But Rogers, who lives on Social Security, finds the increase costly. He says he's stuck with the Humana plan until the end of this year.
But even then, Rogers has to stay with Medicare Advantage because he thinks a straight Medicare plan won't cover his prescription drug needs.
He was laid off as a plant engineer after the company he worked for changed hands. Now, the medicines he takes prevent him from working, he said.
"I live on what I have left," he said. "And I'm very disenchanted with the Medicare Advantage with Humana plan."