A new marketing trick in the Medicare Advantage bag
Part D reforms are being used to lure more people to drop traditional Medicare
I’ve been enrolled in traditional Medicare for a couple years now, and one professional benefit is that I now see much of the same direct mail advertising that my readers get every fall from health insurance companies during the Annual Enrollment Period.
Here’s what I’m noticing in my mailbox during this year’s enrollment: the important, positive changes taking effect next year in Part D prescription drug coverage are giving Medicare Advantage plan sponsors a new way to entice people enrolled in traditional Medicare to shift to Advantage. If you’re one of those people, be very careful about responding to that pitch.
The most important Part D reform next year is a hard $2,000 cap on out-of-pocket prescription costs. That’s going to provide thousands of dollars in relief to beneficiaries who take high-cost drugs for conditions like cancer and multiple sclerosis, and it will give seniors greater predictability in planning their health care spending.
But health insurance companies are revising their offerings more than usual for next year because of changes required by the Act. If you’re enrolled in traditional Medicare with a standalone Part D plan, you may find your premium jumping, or changes in deductibles or cost-sharing arrangements. That means it’s important to re-check your coverage this fall if you’re in a standalone Part D plan. And the same is true if you have a Medicare Advantage plan with drug coverage wrapped in - the terms of that drug coverage may be changing. (I reviewed these shifts in the marketplace in my most recent Retiring column for the New York Times.)
But health insurance companies that sell Advantage plans are using these changes to try to convince traditional Medicare enrollees to shift into Advantage. Check out the letter I received this week from my own current Part D provider, which I’m dropping because the premium and projected total costs is jumping sharply for 2025:
Dear Mark:
Thank you for being a UnitedHealthcare Medicare Part D member. Since your plan premiums are increasing in 2025, now is the time to explore your plan options. If you want reliable care with low out-of-pocket costs, take a look at a UnitedHealthcare Medicare Advantage plan (Part C). This plan may be a better fit for you. Plus, switching to a UnitedHealthcare Medicare Advantage plan could lower what you pay for prescriptions and monthly premiums next year.
The AARP® Medicare Advantage from UHC IL-8 (HMO-POS) combines your doctor, hospital, and prescription drug coverage, offers a $0 monthly plan premium and includes:
$2,000 dental allowance for covered services like cleanings, fillings and crowns
$60 credit every quarter for OTC products in-store or online
$300 allowance for eyewear, plus $0 copay for a routine eye exam and lenses
Free gym membership
No referrals to see any provider in our Medicare National Network
That is a very compelling pitch. Couple it with the millions of dollars that Advantage plans spend on marketing and it’s easy to see why enrollment has been growing so quickly in recent years. More than half (54%) of eligible Medicare beneficiaries are enrolled in Medicare Advantage in 2024, a figure that is projected to hit 64% by 2034.
But here’s what the United Healthcare letter doesn’t say:
I could just search the Medicare Plan Finder for a less costly Part D plan. That’s what I did - instead of a $35 increase, my premium actually will fall about $25 per month in 2025, as will total projected annual costs including the deductible and cost-sharing.
I might need to look for new doctors if I switch. If I join this Advantage plan, I will need to restrict myself to in-network health care providers in order to access the cost savings described in the letter, possibly causing disruption to my current healthcare.
If I move, I probably can’t go back later. Enrollees in traditional Medicare (such as myself) usually pair their Part A, B and D coverage with a Medigap supplemental policy. If I drop that now in order to join a Medicare Advantage plan, I may not be able to get a Medigap down the road if I decide to go back to traditional Medicare.
The drug coverage might not fit my needs. The drug coverage wrapped into an Advantage plan may - or may not- be the best fit for me, depending on the medications I take. It’s important to evaluate not only the health care provider network, but the drug coverage.
And here’s the big thing UnitedHealth isn’t telling me: Medicare Advantage might work just fine for younger and healthier retirees. But the highest rates of dissatisfaction in Advantage are reported by the oldest and sickest enrollees in the program. That’s the conclusion of a investigative report published this week by The Wall Street Journal (gift link here).
Based on a review of Medicare data, the WSJ story details how Advantage plans refused to pay for care in skilled nursing facilities, forcing patients to make abrupt shifts to the traditional fee-for-service program. This sort of denial of care - along with “prior authorization” paperwork tie-ups, are hallmarks of Medicare Advantage plans:
A Wall Street Journal analysis of Medicare data found a pattern of Medicare Advantage’s sickest patients dropping their privately run coverage just as their health needs soared. Many . . . made the switch after running into problems getting their care covered.
Plans run by the private insurers in the Medicare Advantage system are supposed to offer old and disabled people the same benefits they would get from traditional Medicare. The plans can be a bargain for people because they limit out-of-pocket expenses and often offer extra benefits such as dental care.
As recipients get sicker, though, they may have more difficulty accessing services than people with traditional Medicare. That’s because the insurers actively manage the care, including requiring patients to get approval for certain services and limiting which hospitals and doctors patients can use.
People in the final year of their lives left Medicare Advantage for traditional Medicare at double the rate of other enrollees from 2016 to 2022, the Journal’s analysis found. Those private-plan dropouts—300,075 during that time span—often had long hospital and nursing-home stays after they left, running up large bills that taxpayers, not their former insurers, had to pay.
These late-in-life plan shifts can be catastrophic for patient health and for their finances. The article features heart-rending tales of patients who were denied care in skilled nursing facilities following strokes and debilitating accidents.
It’s also costly for taxpayers, the WSJ found:
Medicare Advantage insurers collectively avoided $10 billion in medical costs incurred by the dropouts during that period, the analysis found. If those beneficiaries had stayed in their plans, the government would have paid the insurers about $3.5 billion in premiums, meaning the companies netted more than $6 billion in savings during that period.
I’ve heard for years from consumer advocates who work with Medicare enrollees that the highest rates of Advantage dis-enrollment are among the oldest and sickest patients, and I’ve included this point in many articles over the years. But the WSJ story brings the receipts in the form of Medicare’s own data.
During annual enrollment, the ad blitz for Medicare Advantage is intense, and it lacks any context about what it can mean to give up your traditional Medicare coverage. Medicare has implemented several regulatory reforms aimed at curtailing the use of prior authorization and denial of care, but they are are just beginning to take effect.
Now, with the Trump administration’s return, it’s a safe bet that these reforms will be jettisoned. Project 2025, the governing blueprint developed for the new administration by the Heritage Foundation, makes clear that it wants to accelerate further the already-rapid growth of Medicare Advantage. The document’s chapter on health care calls for making Advantage the “default option” for new enrollees. And, it calls for the federal government to “remove burdensome policies that micromanage MA plans.” (It also calls for repeal of the law empowering Medicare to negotiate drug prices with pharmaceutical companies - and that is one of the ways the government planned to cover the cost of the $2,000 cap.).
The latest signal that the government wants to accelerate the transition away from traditional Medicare was the nomination by Trump of Dr. Mehmet Oz to head the Centers for Medicare and Medicaid Services. Oz is a critic of fee-for-service Medicare, and a supporter of Medicare Advantage.
Review your coverage
Annual enrollment ends of December 7th. Start your review of coverage using the federal government’s Medicare Plan Finder. The finder will show you plans that best fit your prescription drug needs - it will display premiums, but more importantly, it offers a projection of your total costs for the year. That calculation includes premiums, covered out of pocket costs and also the retail cost of any of your drugs that are not covered by the plan. To see which costs are subject to the $2,000 cap, go to the plan details page and look under monthly costs— this may be somewhat different depending on the pharmacies listed.
Here’s a CMS video demonstrating how to use the tool.
If you need help, consult your State Health Assistance Program. And, you can find my full review of the plan marketplace for the New York Times here.
And, you can read a bit more about Medicare Advantage marketing in my Reuters column this week.
Part B premiums and the Social Security COLA
Medicare officials have announced the Part A and B premiums and deductibles for 2025. That means it’s time to run the numbers on how the Part B increase will impact Social Security COLAs.
The standard Part B premium will rise to $185.00 next year - an increase of $10.30, or 5.9% This marks the second consecutive year of a premium hike of nearly six percent.
The Part B premium covers 25% of the government’s projected total program costs, and Medicare officials attribute this year’s increase to expected changes in the health care prices and higher utilization of services. That latter point likely references a continued echo effect of COVID - utilization of health care plunged during the pandemic, and people are still catching up on getting care that they had postponed.
The high dollar amount of the increase will squeeze the Social Security COLA for seniors, which is just 2.5% for 2025. The Part B premium typically is deducted from Social Security benefits, and the squeeze will be most painful for people with lower benefit amounts - because they receive lower dollar COLA amounts.
For example, someone with a $1,200 monthly benefit will see her COLA reduced from 2.5 percent to 1.6 percent, but for someone with a high benefit of $3,500, the reduction brings her COLA down to 2.2 percent.
Deductibles: the Part B deductible will rise by $17, to $257. And the Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital will be $1,676 in 2025, an increase of $44.
IRMAA: Medicare also announced the Part B Income-Related Monthly Adjustment Amounts (IRMAA) - these are surcharges tacked onto the standard premium for higher-income beneficiaries. The surcharge is based on your modified adjusted gross income (MAGI) from two years ago, and the brackets that trip IRMAA are adjusted annually for inflation. So, they’ve gone up a bit for 2025. For example, a beneficiary filing an individual tax return with MAGI of $106,000 will fall into the first IRMAA bracket next year, up from $103,000 this year.
You can find all the details here.
Bluesky smiling at me
After a long run on Twitter, I’ve moved my social media posting on retirement and aging to Bluesky. I stopped posting on Twitter some time ago, because the vibrant community there seemed to have died - or perhaps it was simply suppressed by the site’s relentless outrage algorithms.
So far, Bluesky seems to be off to a great start as a thoughtful, interesting and kind place to engage. If you’re into this sort of thing, give it a whirl. You can find me on Bluesky here.
What I’m reading
Leaping into the unknown of retirement . . . Doing smart Roth IRA conversions in retirement . . . The unspoken grief of never becoming a grandparent . . . Why Trump’s deportations will drive up your grocery bill . . . Caregiving obligations can be murky for older, unmarried couples . . . This company made billions defrauding Medicare . . . How Roth conversions can extend the life of your nest egg.