Medicare/Medicare Advantage - Key Market And Behavioral Trends
The largest barriers impacting the Medicare Advantage patient population which prevent them from obtaining Medicare Advantage plans are technological obstacles, complacency or inertia, fears about increasing premiums, and fears about restrictive networks. In this report I will first provide a general overview of the Medicare Advantage market, and then go through each of these four barriers, noting the evidence for their importance and their effects. I shall also examine two pieces of legislation set to affect Medicare Advantage (MA) plans in the near future.
In 2017, 33% of those with Medicare, or 19 million people, were enrolled in an MA plan, an all time high, and remarkable growth when compared with the low of 13% in 2005. Of those 19 million, 11.9 million were in HMOs (Health Maintenance Organizations), 4.9 million were in local PPOs (Preferred Provider Organizations), 1.3 million were in regional PPOs, 200,000 were in PFFS Plans, and 700,000 were in any other type of plan. Moreover, 69% were in individual plans, while 19% were in group plans, and 12% were in special needs plans.
The Brookings Institution notes that the main tool for seniors to use when comparing and choosing an MA plan is the Plan Finder on Medicare.gov. However, this tool is not always straightforward, and there are several problems with it. The report from Brookings notes, "The Plan Finder summary page provides technical information that may be difficult for many seniors to understand." They also note that the Plan Finder does not display out-of-pocket costs specific to where the beneficiary lives, causing confusion and spreading inaccurate information. The Plan Finder also does not provide clear information about what doctors are included in any particular plan. Instead, seniors seeking to verify whether their doctor will be covered are simply directed to the plan's website, which can often be inaccurate, and create even more confusion for seniors. Indeed, the report also notes that the whole process is highly reliant on computer literacy, which can be a challenge for some older Americans.
One of the biggest barriers to seniors signing up for MA plans is simple inertia. According to KPMG, 10% of fee-for-service patients, who could benefit significantly from MA plans in many cases, did not sign up for them because they "never got around to it". This is likely driven by a combination of lack of knowledge about MA plans, and health insurance generally, and simply how unpleasant the whole process is.
A major factor for all health insurance providers and others in the industry to consider is the lack of health insurance literacy in the US. More than half of US adults could not correctly identify even one of the common health insurance terms premium, deductible, and copay. Moreover, only one in five could correctly calculate how much they would owe for a routine doctor's visit based on their plan. This already low health insurance literacy among American adults generally is even worse among seniors. This confusion in turn contributes to stress and an overall unpleasant experience shopping for Medicare plans. In fact, 58% of seniors say that they don't look forward to reviewing their Medicare plan, and 20% describe the experience as "awful". Further, 23% of seniors describing reviewing Medicare plans as one of the two least pleasant things they do, including getting a colonoscopy.
A combination of lack of understanding and the unpleasantness of the experience causes seniors to tend to stick with their existing arrangements rather than signing up for new plans or changing the plans they have.
Seniors often develop close relationships with physicians, and so its not surprising that 29.3% of seniors polled said that "keeping my own doctor" was the most important factor when considering Medicare plans, making it the second most common response, after cost. This leads to an important barrier to signing up for MA plans, since they tend to have more restrictive networks. In fact, 33% of Medicare users with chronic conditions who did not choose an MA plan said that it was because physician and hospital networks were too limited. More generally, 37% of those surveyed said they would not choose an MA plan if they were restricted in their choice of physician and 75% would change their mind about a plan they initially were open to if their existing primary care physician was not in the network.
These concerns are legitimate - 35% of MA beneficiaries were in plans with what the Kaiser Family Foundation deems to be "narrow networks" with relatively few physicians and hospitals included, compared to just 22% in broad network plans. Indeed, on average just 46% of physicians in a given county will be included in MA networks, meaning that one's existing doctor, as we have seen a crucial factor in people's decisions, probably won't be included in a given MA plan.
threat of higher premiums
40.2% of seniors polled said that cost was the most important factor when picking a Medicare plan, making it by far the most common response. It is therefore unsurprising that cost, and fears about rising costs, can be a barrier to seniors signing up for MA programs. 34% of plans surveyed said they were considering increasing premiums for MA plans, as a result of decreasing federal funding for Medicare Advantage.
There are a range of other barriers which prevent seniors from finding and choosing MA plans. One often overlooked factor is that according to the Kaiser Family Foundation, as of August 2017, 147 counties across 14 states have no Medicare Advantage insurer at all, making it impossible for residents of those counties to obtain Medicare Advantage. Another barrier is a general distrust of managed care - 36% of those without chronic conditions and 29% of those with them cited a discomfort with managed care as their reason for not getting a Medicare Advantage plan.
Two important pieces of legislation affecting MA plans are the CHRONIC Act, which was folded into the budget passed earlier this year and the Medicare Access and CHIP Reauthorization Act (MACRA). The first of these means that, going forward, Medicare Advantage plans will be able to include non-medical services, such as transportation to the doctor and home delivery of meals. Moreover, MA plans will be able to include long-term supports and services. The second means that in counties which have at least two eligible MA plans competing, Medicare Cost plans will be discontinued in 2019. This will likely cause more people to join Medicare Advantage as it reduces the number of possible alternatives. Naturally, the legislation affecting Medicare in all its components, both directly and indirectly, as well as that affecting seniors is extremely complex. If you want a more detailed breakdown of legislation in this area, it may be worth requesting a brief specifically on the subject of Medicare legislation.
Medicare Advantage is increasingly popular, however there are still significant barriers to seniors researching and joining Medicare Advantage plans. The four most significant of these are technological barriers, complacency, fears about premiums, and fears about restrictive plans. Two pieces of legislation set to affect Medicare Advantage and those who use it going forward are the CHRONIC Act, passed as part of the 2018 federal budget, and the Medicare Access and CHIP Reauthorization Act.