Medicare private plan marketing’s a miracle–for insurer profits

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I was surprised to find out recently that nearly one-fourth of Medicare patients are enrolled in private Medicare Advantage plans, which are offered by the big health insurance companies that we know and don’t love. Enrollent is growing by the millions each year. But why, since these plans don’t provide better health outcomes, cost taxpayers tens of billions of dollars more than regular Medicare and can restrict coverage more tightly than regular Medicare? The answer came from my mailbox–a flood of costly, glossy, taxpayer-funded marketing by private insurers.

ma.pngSomeone in my family is about to be eligible for Medicare. For the last couple of months, almost every mail delivery has brought a new bundle of slick brochures featuring photos of healthy, energetic, "65 is the new 50" seniors. They pitch a variety of a privatized Medicare plans–HMO, PPO, other managed care, not-managed care, occasionally offering a perk like vision care. Some of them came in a form that looked like it was from the government–official and flag-draped.

What came in the mailbox from Medicare itself? Nada. Zero. Not even a postcard saying "You’re about to turn 65, so give us a call to sign up for Medicare now." No mailed or e-mailed info on where to call, or what website to check.

Since Social Security has our age information and our address, and is responsible for signing up Medicare recipients, why wouldn’t it send even one piece of information?

I called the Social Security Administration to ask. The answer boiled down to this: We’re not allowed to use participants’ information to send any marketing messages, but there are no restrictions on the private companies. The person I talked to (anonymous at her request) said "Go for it" when I said I wanted to write about this uneven playing field. It’s worth noting that I reached a live person who could answer my question in under 5 minutes just by dialing the listed Social Security phone number and without identifying myself as an advocate.

Some of my friends are in Medicare Advantage private plans. The HMOs, including a Kaiser plan, have all the usual restrictions on staying inside the HMO for your care, and often delays in getting it. The PPOs, such as a major one offered in California under the Blue Cross brand, are laden with up to 20% copays and thousand-dollar deductibles. I did some math, and most people could get Medicare’s Part B doctor coverage, a prescription drug plan and a private (highly regulated) Medicare supplement plan for what they pay into a PPO, and with much greater freedom and choice than in a private HMO.

Yet the private plans get government funding that is 14% on average above regular Medicare, because of a payment formula that must have been written by an insurance lobbyist. Certainly much or most of that of that is going to marketing, insurance broker commissions and fragmented overhead and executive salaries. Whose pocket does it come from?

The answer: taxpayers–and seniors who choose regular Medicare. The federal MedPAC–the Medicare Payment Advisory Commission–directly links major price increases for Medicare Part B doctor coverage to the bloated payments for Medicare Advantage plans. From January 2008 testimony (PDF) by the executive director of MedPAC:

Medicare pays far more for each beneficiary who opts for [a Medicare Advantage] plan than it would if they stayed in [traditional Medicare].  In addition to promoting inefficiency in [Medicare Advantage], this misalignment increases the burden on taxpayers and beneficiaries, who must pay higher Part B premiums, whether they are in managed care plans or not.

President Obama has vowed to eliminate the bloated overpayments to private Medicare plans, but faces a storm of insurance lobbying power--including scare campaigns threatening their customers with cuts in care rather than more efficient care. God forbid that the parent-company CEOs making $10 million and up per year might take a pay cut.

I’d suggest that Congress also allow–and require–a little more marketing by Medicare. Even a couple of postcards would go a long way–one well in advance, and one near the deadline a couple of months before a senior turns 65. Also restrict the companies to a maximum of two modestly sized mailings.

Americans are happy to get their Medicare, and I suspect they don’t actively want to get it through Wellpoint or United Healthcare (which pays AARP to use its brand name) or Blue Shield. They just don’t hear at all from Medicare, and they hear daily from the corporate behemoths, clamoring to get seniors to call them first.

Consumer Watchdog
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