Medicare

Medicare is the public health program that provides health coverage to approximately 69 million seniors over the age of 65 and people with disabilities.¹ The Balanced Budget Act of 1997 created an HMO-style option called Medicare Part C. The Medicare Modernization Act of 2003 renamed the program Medicare Advantage (MA), instituted private drug coverage, and provided flexibility to companies running these plans. More than half (34.6 million) Medicare beneficiaries are now enrolled in MA.  

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Care Delays and Denials

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Unlike Traditional Medicare (TM), MA plans require prior authorization for common medical procedures, including chemotherapy and hospital stays. The number of prior authorizations required by insurers has grown substantially in recent years. In 2022 alone, there were 46 million prior authorization requests for MA plans.² There are now 3,688 services or therapies that insurance giant Cigna requires prior authorization for in MA, compared to just 52 services, mainly cosmetic, that require prior authorization in TM.^3,4

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These requests take time and often act as roadblocks for doctors who are simply trying to provide needed medical care to seniors and people with disabilities. The portion of prior authorizations that are denied has also increased in recent years, with 3.4 million requests denied in 2022. Disturbingly, more than 8 in 10 denials are overturned once appealed, demonstrating that many care denials by insurers are unjustified.⁵

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Insurers running MA plans also use step therapy, which is not used in TM. Step therapy requires patients to try cheaper drugs than the one their doctor prescribed before getting coverage for the drug their doctor prescribed. 

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These processes are obstacles to patient care. The American Medical Association found that in the case of prior authorization, 93% of physicians said it has a negative impact on clinical outcomes, 94% report that it delays needed care, and 24% report that it has resulted in serious harm, including hospitalization, permanent impairment, or death of a patient.⁶

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Clinician Burnout

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Being on the frontlines, clinicians are negatively affected by MA abuses. Eighty-nine percent of physicians say that prior authorization increases burnout.⁷ Further, physicians have been combating fee schedule decreases while MA insurance companies report record profits. MA plans often pay physicians less than the TM rate, causing even more burnout and stress. 

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Waste, Fraud, and Abuse

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Research has found that the government overpays insurance corporations running MA plans by up to $140 billion a year.⁸ These overpayments are driven by insurers adding more medical diagnoses (risk-adjustment) to a patient’s chart because it yields higher payments from the government. The OIG found that 1.7 million beneficiaries had questionable diagnoses added by MA in 2023.⁹ If an insurer is investigated or prosecuted for these schemes, the most they receive is a small fine compared to the profits they made from upcoding. MA insurers also have engaged in practices to favorably select healthier patients and avoid sicker patients to decrease the money they spend on medical care. 

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Insurers are striving to make larger profits driven by these overpayments. Humana told investors it would implement “larger benefit reductions” to boost margins in MA plans for 2025.¹⁰ Aetna cut benefits with its self-described goal for 2025 of “[profit] margin over membership.”¹¹

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Health Outcomes

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Researchers found that if a person has MA, they are almost two times more likely to die after pancreatic cancer surgery compared to with TM. The chance of dying after surgery for stomach or liver cancer is 1.4 times greater than TM.¹²

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The Potential of Medicare

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The Medicare program holds immense potential to improve health outcomes and lower health care costs. Surprisingly, the necessary improvements to Medicare would likely not cost any additional money since there is a surplus of $140 billion per year that is currently going to inaccurate overpayments to insurance corporations. 

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Capping Out-of-Pocket Costs

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One way to further harness the potential of the Medicare program is to cap the out-of-pockets (OOP) costs for people in traditional Medicare (TM). Right now only MA plans have OOP caps which often corners beneficiaries into choosing an MA plan even though it comes with obstacles to care. Instituting an OOP cap inTM would give seniors and people with disabilities true choice in choosing their Medicare plan. The Congressional Budget Office found that certain policies to cap OOP costs in TM could lead to savings of billions of dollars, likely in part because people would choose TM instead of the private MA plans that are more expensive to the Medicare program.

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Dental, Vision, and Hearing Coverage

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Another necessary improvement to Medicare is the addition of comprehensive coverage for dental, vision, and hearing care. Currently, 37 million Medicare beneficiaries have no dental coverage. MA plans claim to offer these services. However, this coverage is extremely limited. For example, less than half of MA enrollees have coverage for comprehensive dental care such as dentures. Many MA plans only cover care like teeth cleanings and place a low limit on how much care they will pay for each year. Adding dental, vision, and hearing coverage would improve health outcomes for seniors and people with disabilities. America’s Health Insurance Plans found that it would be affordable as well, reporting that they could pay for this comprehensive coverage without changes to the benchmark payments they currently receive. 

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Improving Health Equity and Outcomes

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Researchers found that lowering the Medicare eligibility age would cut the disparity in health insurance status between Black and Hispanic Americans and white Americans in half. Lowering the eligibility age would also reduce disparities in self-reported health status. Scientists at another institution found that cancer diagnoses spike at age 65 because people wait until they have access to Medicare to get screened and treated. This provides more evidence that Medicare improves health access and outcomes and that lowering the Medicare age would allow more people to benefit from these improved outcomes. 

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Policy Proposals to Reform Medicare Advantage

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Stop overpayments to insurers due to upcoding

Savings 2025-2034: $1.049 trillion¹⁴

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CMS uses a coding intensity adjustment that reduces MA risk scores by 5.9% to account for upcoding. MedPAC reports that true coding intensity is 20%.¹³ This policy would increase the coding intensity adjustment to 20%.

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Stop overpayments to insurers due to health risk assessments

Savings 2025-2034: $124 billion¹⁵

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MA insurers often employ nurses or other health care workers to go to a beneficiary’s home to perform a health risk assessment. These assessments are often used to add diagnosis codes to the patient’s chart so the insurer gets higher payments from the government, yet the diagnosis codes are frequently for conditions seldom treated by medical providers. This policy would exclude diagnoses made during these risk assessments from a beneficiary’s risk score.  Two years of diagnostic codes would be used instead. 

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Reduce favorable selection

Savings 2025-2034: Up to $470 billion¹⁶

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Favorable selection occurs when MA plans disproportionately enroll healthier patients while avoiding sicker patients who have high care costs. MA plans do this through care obstacles such as prior authorization and narrow networks that disincentivize many patients from enrolling in MA. Policies to reduce this phenomenon, such as prohibiting prior authorization requirements for procedures not requiring PA under TM, could reduce MA overpayments. 

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