Filling the Gaps in Medicare Advantage

Insurers are selling supplemental plans that by rights you shouldn't need.

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Medicare Advantage plans came under fire last month when it was reported that these private managed care plans, conceived as a way to offer more comprehensive coverage than traditional Medicare while at the same time saving seniors and the government money, end up costing some beneficiaries more. The government report, which I wrote about, concluded that beneficiaries could face higher cost-sharing for certain services, including home health, skilled nursing, and inpatient hospital stays.

Now it turns out that savvy insurers are capitalizing on these coverage shortcomings, offering supplemental insurance policies to fill gaps in Medicare Advantage plans that weren't supposed to be there. California Health Advocates, a consumer advocacy group, described the practice in a report published last November. "The existence of these [supplemental] plans is a symptom of a larger disease," says David Lipschutz, interim CEO of California Health Advocates. "Enough of the Medicare Advantage plans don't provide sufficient benefits that people are being convinced to buy additional policies to fill in those gaps."

Growth in Medicare Advantage plans has been on the rise: Twenty percent of seniors now belong to MA plans. There's no telling how many have bought supplemental policies, but one of the first companies to sell them, Guarantee Trust Life Insurance Co. in Glenview, Ill., has sold about 9,000 "Advantage Plus" supplemental policies in the two years since they introduced it, says Carl Leader, vice president of sales. The company offers the plans in roughly 39 states, he says.

The policies typically offer flat reimbursements to seniors for various services, such as inpatient hospital care, ambulance coverage, skilled nursing facility care, durable medical equipment and/or cancer chemotherapy, says Lipschutz. A typical "Advantage Plus" policy, for example, might cover $180 per day for inpatient hospital care and $200 per ambulance trip for a $25 monthly premium, says Leader.

Whether or not the Medicare Advantage supplemental plans could be a smart buy for seniors would depend on the specifics of their MA plan as well as the supplemental plan they're considering. In traditional Medicare, both the benefits and the supplemental Medigap plans are standardized, so it's easy for seniors to compare their coverage options. With Medicare Advantage, however, plan deductibles, copayments, and benefits are all over the map, as are the supplemental coverage options. This makes comparison difficult, and there's a risk that seniors will buy coverage that duplicates what they already have, says Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation. And the confusion factor can't be underestimated either. "There's already substantial confusion and lack of basic information about the different forms of health insurance available to seniors as an alternative to [traditional] Medicare," she says. "[These policies] may contribute to that."