Medicare Advantage Plans Facing Changes

April 6, 2009
Special Feature

The Centers for Medicare and Medicaid Services recently announced new standards that private Medicare plans, known as Medicare Advantage plans, must meet if they want to bid on the Medicare insurance business this year.

The Centers for Medicare and Medicaid Services recently announced new standards that private Medicare plans, known as Medicare Advantage plans, must meet if they want to bid on the Medicare insurance business this year. About 25% of all Medicare beneficiaries, more than 10 million people, are currently covered by Medicare Advantage plans, which usually offer coverage of doctor and hospital services, as well as prescription drugs, under one umbrella policy.

One of the most significant requirements is one that would make insurance companies cap out-of pocket expenses for their members at $3,400 or less. The new rules would also bar the insurers from charging more than traditional Medicare for services like dialysis and home health care, and would also make them explain confusing benefits, like the “doughnut hole” in the Part D prescription drug program, in simpler terms.

The Medicare Advantage plans are usually cheaper than the combined cost of traditional Medicare and a Medigap policy, partially because they are subsidized by the government. Those subsidies are coming under increased scrutiny, however, with many lawmakers in favor of scaling them back or eliminating them entirely. Health insurers argue, however, that cuts in subsidies would result in increased premiums, which could force many low-income beneficiaries into traditional Medicare without any supplemental coverage.