The subtle privatization of Medicare |
If you’re signing up for Medicare benefits this open enrollment, odds are you aren’t actually enrolling in the traditional government program that people may envision. More than half of Medicare beneficiaries are now choosing an alternative version of the program administered by private companies.
Medicare, the paragon of America’s welfare state, is undergoing a subtle but fundamental transformation from government program to public benefit provided by private companies, a shift with major implications for both patients and taxpayers. This alternative version of Medicare, known as Medicare Advantage, now covers more than half of the program’s 63 million enrollees, or about 34 million Americans — nearly double its share 10 years ago.
Fears over Medicare’s solvency have renewed the debate about how much the plans cost the federal government. New data shows Medicare Advantage enrollees have access to only half as many doctors and health care providers as patients on traditional Medicare. And media investigations have added to concerns about how private companies oversee the public benefits they are supposed to provide.
If you’re choosing between traditional Medicare and an Advantage plan, here’s what you should know about the two versions of the program — how we got here, the potential drawbacks, and what could be in store for the program going forward.
What is Medicare Advantage?
Medicare has traditionally been a government-run insurance program for people over 65 and those with long-term disabilities. Medicare Advantage allows private insurers to offer their own plans that provide Medicare benefits, as well as some additional perks not available in the original program. The secret to the program’s success is simplicity. Traditional Medicare is a fragmented program: Part A covers hospital care, and Part B covers outpatient services. Patients must enroll in a separate Part D plan for prescription drug coverage that is administered by private insurers. Most people also purchase supplemental coverage, extra insurance that helps reduce their out-of-pocket costs.
Medicare Advantage, also known as Part C, combines those benefits into one insurance plan that also includes an annual limit on out-of-pocket costs, something that does not technically exist in regular Medicare.
Why Vox is covering open enrollment
Open enrollment, the set time period for picking health benefits for the coming year, is a moment when millions of people come face-to-face with the complexity of American health insurance.
Our goal is to help you make choices about your own health — and understand how the health system got this way. Here are the questions you should ask yourself while picking a health plan, and here’s why health care in America is tied to your job in the first place. Here’s how dental insurance and flexible spending accounts came to be, and why even most Medicare beneficiaries get insurance through private companies.
Is there a better way to do this? Judge for yourself: In 2020, Vox explored the upsides and downsides of health insurance systems in Taiwan, Australia, the Netherlands, and the United Kingdom.
But the benefits to patients seem to come at a cost to taxpayers. Though the health insurance industry disputes these findings, MedPAC, the independent committee tasked with overseeing Medicare on Congress’s behalf, found Medicare Advantage plans cost the federal government more money per patient than the original program would have if those same people had stuck with the traditional benefits.
Private companies are also making healthy margins on their Medicare business. A Kaiser Family Foundation analysis found that insurers were making more money per patient in Medicare Advantage than with their individual or employer-sponsored plans. Humana, which covers 5 million beneficiaries, or roughly one in five people who have elected to go with the Medicare alternative, announced in 2023 it........