Problems with Medicare Advantage Plans Keep Mounting

People tend to like their Medicare Advantage plans — until they don’t. Consider the case of Rose LaChapelle, who says the Medicare Advantage plan that was supposed to provide care for her 92-year-old mother has failed her now that she needs it most.

After getting COVID, LaChapelle’s mother was hospitalized with a severe bowel blockage. “Her health and her cognitive abilities declined after that,” LaChapelle, 69, of Sarasota, Fla., recalls.

“She lived alone and was hospitalized five or six times within a year and a half. Basically, her Medicare Advantage insurance … refused to pay for her to go to a rehab facility after each hospitalization.” Declining mentally, LaChapelle’s mother took the insurance company’s refusal to pay as validation of her own fitness to go home.

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With each hospitalization, LaChapelle’s mother grew weaker. Now, she’s in an assisted living facility where she, again, has been denied physical therapy despite having leg pain.

“I don't think that these insurance companies know how they are affecting the people that are a lot older,” LaChapelle says.

The promise of Medicare Advantage plans

Medicare Advantage (MA), the private insurance alternative to traditional Medicare, is now the choice of more than half of Medicare enrollees. And it’s expected to continue to grow. While most enrollees are satisfied with their plans, MA faces mounting criticism for denying and delaying some needed care while costing taxpayers billions more than government-run, so-called fee-for-service, traditional Medicare.

“Part of the promise of having private plans participate in Medicare was that they could deliver better care more efficiently and they have done neither. The care outcomes at best are decidedly mixed,” says David A. Lipschutz, co-director of the Center for Medicare Advocacy.

James Swann, a spokesman for the insurance trade organization AHIP (America’s Health Insurance Plans), says MA beneficiaries are well-served. “More than 34 million seniors and people with disabilities choose Medicare Advantage for their health coverage because it provides them better care at a lower cost than fee-for-service Medicare,” he says.

According to KFF Health News, the recent presidential election may accelerate the growth of MA: Donald Trump “and many congressional Republicans have already taken steps to aggressively promote Medicare Advantage. And Project 2025, a political wish list produced by the conservative Heritage Foundation for the next presidency, calls for making insurer-run plans the default enrollment option for Medicare.”

Attractive for individuals

The reasons for Medicare Advantage’s expanding popularity are readily apparent: lower costs for individuals, simpler selections and extras, such as dental and vision coverage and even gym memberships, not provided by traditional Medicare.

A recent J.D. Power survey found that customer satisfaction with Medicare Advantage plans is significantly higher than with other commercial health plans. The J.D. Power survey did not rate satisfaction with traditional Medicare, but KFF (formerly the Kaiser Family Foundation) reports similar rates of satisfaction from enrollees in both types of Medicare.

To be sure, Medicare Advantage is a lot easier to understand than traditional Medicare, with its various parts A, B and D. And, while MA costs taxpayers more, it offers individual beneficiaries significant savings — as much as $2,500 a year, according to AHIP. Most Medicare Advantage enrollees don’t face any monthly charges beyond the basic Part B premium, while enrollees in traditional Medicare face added charges for Part D prescription drug coverage. And some MA plans actually buy down the Part B premium, meaning those enrollees’ monthly costs are lower than the Part B premium.

Moreover, MA plans cap beneficiaries’ out-of-pocket costs, something traditional Medicare does not do. So, Medicare enrollees could face potentially astronomical costs unless they can also enroll in a Medigap plan for an additional monthly premium.

MA downsides

Medicare Advantage has significant downsides:

Higher costs for taxpayers. By one estimate, taxpayers pay 22% more per Medicare Advantage enrollee than the cost of traditional Medicare.

Provider network drawbacks. MA has limited provider networks that can change, sometimes leaving beneficiaries unable to keep their doctors. This is especially true as health care systems around the country increasingly stop accepting MA insurance contracts. Patients with traditional Medicare face no such limitations and can use any doctor who accepts Medicare.

Preapprovals and denials. MAs increasingly require that some kinds of care be pre-approved. This process, a U.S. Senate report concluded, “has become not just a bureaucratic maze, but a potential threat to [beneficiaries’] health.”

These plans have been accused of denying medically appropriate services, particularly rehabilitation after hospitalization. The Senate report noted that some insurers’ denials of coverage surged as companies increased their use of artificial intelligence tools.

The hard sell. Aggressive MA marketing practices may mislead beneficiaries, who then believe they can get plan extras advertised in their areas, only to find the extras unavailable.

“Medicare Advantage was created, ostensibly, to improve costs, choice and the quality of care,” three authors wrote in the Journal of Internal General Medicine. “However, hearings and reports suggest that many MA plans may be falling short on all three metrics.”

The Medigap trap. If you have had a Medicare Advantage plan for over a year and want original Medicare and a Medigap policy instead, you may face the Medigap trap. In most states, Medigap plans are available only in the first six months after you become eligible for Medicare. After that, plans may require a health screening. You may be denied coverage or be charged higher rates if you have significant health problems or pre-existing conditions.

Picking plans and trade-offs

According to KFF, there are nearly 4,000 Medicare Advantage plans nationwide, with the average Medicare beneficiary having a choice of 43 Medicare Advantage plans. However, the Senate report noted that the largest MA insurers, UnitedHealthcare, Humana and CVS-Aetna, account for 58% of Medicare Advantage enrollees.

“There are trade-offs that people make when they decide whether or not to stay in traditional Medicare or enroll in a Medicare Advantage plan,” Lipschutz says, “and among the trade-offs are extensive use of prior authorization and limited provider networks that are not widely advertised, marketed or explained to people before they enroll.”

While patient satisfaction ratings cite ease of finding care and provider choice as positives of Medicare Advantage, investigators have found areas of concern. For example, a study in the Journal of Clinical Oncology found that MA patients who needed complex cancer surgery had higher short-term death rates and less access to experienced hospitals than traditional Medicare enrollees.

Other investigations have found that patients who need post-acute care services after being hospitalized can run into trouble when Medicare Advantage plans require authorization before they receive such care.

The U.S. Senate Permanent Subcommittee on Investigations, using data from the three largest MA insurers, found they “are intentionally using prior authorization to boost profits by targeting costly yet critical stays in post-acute care facilities.”

Vulnerable patients

“The people who are victims of this overuse — and I stress overuse — and abuse of prior authorization are vulnerable because they've just been through surgery or a serious accident, and they are emerging from a really potentially traumatic incident in their lives,” says Subcommittee Chairman Richard Blumenthal (D-Conn.) “They need serious rehabilitation or in-patient services following acute surgery.

“And they're also vulnerable financially because they're likely to be in need of financial support for the care that they require. In all kinds of ways, they're more vulnerable. But the Medicare Advantage private insurers exploit that vulnerability to put profits ahead of those people who are vulnerable.”

The Senate report echoed the findings of a 2022 investigation by Medicare’s inspector general, which found that some Medicare Advantage insurers sometimes wrongly delayed or denied Medicare Advantage beneficiaries' access to services they should have gotten.

The inspector general report said the plans also wrongly denied payments to providers for services, adding that these denials “may prevent or delay beneficiaries from receiving medically necessary care.”

The consequences of being denied post-acute care are “huge” for patients, says Sandy Leith, director of the Senior Health Insurance Program for Illinois. “Some people just take it and go home,” she says. “They haven't had the rehab and their health is setting in. Then they're getting all locked up without proper, 100% full-time, skilled care, and then maybe they'll fall and then they go back into the hospital and then try this all over again.”

Pre-approvals slow care

Even when care is approved, the time-consuming pre-approval process harms patients, advocates say. Dr. Karl Sandin is chief clinical officer for the American Medical Rehabilitation Providers Association, which represents nearly 800 inpatient rehabilitation hospitals. Sandin says required MA pre-approvals delay rehab care, allowing patients’ medical conditions to deteriorate, making recovery more of a challenge.

Sandin says the process typically delays care for two days or more. Recently, he says a patient with a bilateral stroke, who clearly needed rehab, had to wait six days for her MA insurance to give the green light. By the time she started her rehab, her condition had deteriorated and she was at greater risk for complications like pneumonia and blood clots.

“There's evidence in stroke, that with lack of use of an arm after a stroke or a leg, after a stroke within 24 hours, the part of the brain that’s receiving information about how that arm or leg is working starts to shrink,” Sandin says. “So if we're not trying to force the use of that extremity early on already, we're losing some brain cells over and above the stroke.”

The way MA insurers require prior authorization for rehab care, he adds, is “a very clear care-delay process,” not an effort to achieve efficiency. “It's just because insurance companies don't want to spend money.”

Follow the money

MA is hugely profitable compared to other insurance markets, according to an analysis from KFF. In 2021, the analysis found, Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, more than double the $745 margins reported by insurers in the individual/non-group market and the $689 margins for the fully insured group/employer market.

One reason may be what’s called “upcoding,” which is when an insurer assigns an inaccurate billing code to a medical procedure or treatment to increase reimbursement.

Another inspector general report released in October said upcoding raises the costs paid by the government. “Taxpayers fund billions of dollars in overpayments to MA companies each year based on unsupported diagnoses for MA enrollees,” according to the inspector general.

Hospitals opt out

Citing bureaucratic delays and difficulty collecting payments, dozens of health systems around the country are refusing contracts with particular Medicare Advantage plans or with any MA plans at all.

A survey of health systems by the Health Care Management Association revealed that 19% had stopped accepting one or more Medicare Advantage plans in 2023. And 61% reported that they were either considering or planning to stop accepting all Medicare Advantage patients within the next two years.

The problem is nationwide, but more acute in some areas. In Minnesota, for example, nearly every major health system is refusing to do business with the three largest MA insurers, according to Kelli Jo Greiner, health care policy analyst and Medicare product manager with the Minnesota Department of Human Services.

The state’s Senior Linkage Line, which helps beneficiaries during open enrollment, was inundated with calls from people concerned they could no longer see their preferred medical providers, Greiner says. Counselors were consumed helping callers find alternative plans.

What’s next

Blumenthal says reforming Medicare Advantage is a bipartisan issue because the people affected belong to both parties. While he says he thinks general Medicare should be expanded to provide better coverage, he adds that’s no excuse for failing to reform Medicare Advantage.

In the meantime, he says, “People need to make smart choices for themselves with their eyes wide open about what the pitfalls are.”

And if coverage is denied, enrollees should advocate for themselves.

“One of the very important findings here is that only a small percentage of denials are appealed,” Blumenthal says. “But a large percentage of the appeals are vindicated and the initial decision, the initial denial reversed, which says to me, there's a lot of merit in people feeling that their denials were wrongly decided and more of them might get what they want if they appeal.

“The moral of the story is appeal.”

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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