What are the economics of Medicare Advantage from the POV of the insurance company?

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It appears from the POV of the customer they’re giving away a free product that they spend tons of advertising to get you to buy, and it includes free stuff like preventive care. It has all the hallmarks of a scam but I can’t see who’s being scammed.

In: Economics

5 Answers

Anonymous 0 Comments

Medicare Advantage (Medicare part C. Real. Not a scam) plans receive a fixed payment per beneficiary from the federal government. The difference between the total of those fees, and the claims they pay out every year, is how they make a profit. The theory is that they are, therefore, motivated to provide care more efficiently than the traditional Medicare fee-for-service model.  

On the revenue side, because they earn fixed amounts per beneficiary, they are incentived to advertise to and provide incremental benefits to enrollees to try to attract them. E.g. to offer coverage for some services which Medicare excludes.

On the costs side, because the fixed payment is their only source of revenue, Medicare Advantage tends to operate more like private insurers who share their profit motive. I.e. to try to keep costs to a minimum. They do this, for example, by requiring co-payments for visits, limiting the network to certain providers, reducing administrative overhead, and other features of “managed care” plans.  

Whether or not they actually succeed in doing so is a matter of much debate.

Anonymous 0 Comments

One of the biggest pitfalls in my observations is that the network of providers is often limited to the area you live in: the insurer is able to leverage network partnerships for inexpensive rates for care at home, but outside your home city, provider options for non emergency care will be very limited without referrals.

Anonymous 0 Comments

The product isn’t free, You still pay premiums for Medicare B, and Medicare pays the Advantage plans.

Generally they can offer lower cost sharing for the same premium price by gatekeeping expensive providers and treatments, something original Medicare does less of.

Not charging a deductible or copay on your checkup isn’t costing them much money compared to a guy with heart disease and lung cancer.

Anonymous 0 Comments

Never get an Advantage plan. It’s nothing more than a HMO with so called advantages. I’m 65 and went with traditional Medicare with a supplement plan N. Your not tied to a network you can go to any doctor that takes Medicare and that’s about 99 percent of all the Doctors in the USA. I pay about $200 a month which is on the top end since I’m in Florida on top of Plan B which everyone has to pay. I have a $240 deductible to meet and after that I may have to pay up to a $20 office visit fee but I have not been billed by any doctor I have seen yet. And $50 for an Emergency room visit but if your admitted it’s waived.

After that everything is paid for by Medicare and the Doctor decides my care, not some HMO corp. No referrals or anything like that. HMO’s are the devil. lol. Doctors love Medicare as they submit the bill electronically to Medicare and are paid in 48 hours and no haggling with insurance companies. As long as Medicare covers any said procedure your Doctor can do it and get paid quickly. As far as prescriptions you need to have a plan D plan. Mine is $0 a month and surprisingly they do have fantastic discounts on meds and some I just got the other day cost me nothing. Yes no Dental or Vision but I will pay my Dentist out of pocket for a couple teeth cleanings a year but my wife is a school teacher and I’m on her plan but not this year. No Way in Hell should anyone get talked into the Dis Advantage plan. Just my thoughts.

Anonymous 0 Comments

They get money from the government (and some from you by way of premiums), and they spend less than they take in. It’s that simple. How they allocate what they’re given varies from plan to plan, and it makes it look like they have freebies etc, but then they might deny actual coverage for medical issues you have or severely limit who you can see. They all get the same chunk of change from the government; they just all divvy it up in slightly different ways to differentiate themselves.

Who is being scammed? Taxpayers because they’re letting private companies skim cream off the top of public funds for healthcare.