Medicare Advantage Plans Attracting Lower-Income Seniors — While Saving Them $1,600 Per Year

Medicare Advantage plans have long been a thorn in skilled nursing facilities’ sides, with lower-per day rates and increased pressure to reduce lengths of stay than traditional fee-for-service Medicare.

But a new report shines a light on why seniors are increasingly choosing the plans in the first place, reinforcing recent calls to embrace working with the public-private insurers — or risk getting left behind.

Seniors enrolled in Medicare Advantage plans spent nearly $1,600 less on health care expenses than their counterparts covered under traditional Medicare in 2017, the most recent year for which data was available, according to a new report from the Better Medicare Alliance and ATI Advisory.

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That’s a savings increase from $1,267 in 2016, the Washington D.C.-based Better Medicare Alliance — which advocates for increased adoption of Medicare Advantage plans — reported.

“Polling finds that Americans’ single greatest concern today is lowering consumer health care costs,” Allyson Schwartz, the group’s CEO and a former U.S. representative, said in a statement. “As this report make clear, Medicare Advantage continues to do exactly that.”

The $1,600 gap accounts for both insurance premiums and out-of-pocket costs: Seniors with regular fee-for-service coverage paid a total of $4,685 in health expenses in 2017, compared to $3,087 for Medicare Advantage enrollees.

Perhaps not coincidentally, the report also illustrated Medicare Advantage’s increased uptake among lower-income seniors: Just about half of all MA enrollees in 2017 lived below 200% of the federal poverty level — defined as income of $24,523 for a single-person household — as opposed to 40.1% for fee-for-service Medicare.

On the flip side, the Better Medicare Alliance and ATI Advisory determined, only around a quarter of MA beneficiaries had incomes greater than 400% of the federal poverty level, versus more than a third of FFS enrollees.

“As Medicare Advantage enrollment grows, policymakers may be interested in building on Medicare Advantage’s success in achieving lower out-of-pocket costs and additional benefits for beneficiaries, with particular appeal for low- and modest- income individuals,” the group concluded. “Enhancing information and access to low-cost, high-quality Medicare Advantage plans will foster the kind of service delivery innovation that the growing numbers of older Americans need.”

The data clearly illustrates the reasons why consumers have increasingly opted to enroll in Medicare Advantage, despite the potential for coverage squeezes once they age into institutional long-term care. While overall national penetration rates sit at around 33%, leaders have noted that the uptake rate is much higher among the waves of Americans turning 65, who are attracted to the additional benefits and potential for reduced out-of-pocket costs.

“If that program had just started, we’d be at 66%,” Marc Zimmet, president of consulting firm Zimmet Healthcare Services Group, said recently of the New Jersey Medicare Advantage penetration rate. “It’s going nowhere but up.”

That may be cold comfort for nursing home operators in markets with significant Medicare Advantage uptake. With a private insurer’s eye toward reducing costs, these plans often pay significantly less per day than traditional fee-for-service Medicare for the same skilled nursing services, and often exert pressure to discharge residents substantially faster than in the past.

But the data backs up a prediction that Zimmet made during the same presentation.

“It’s happening organically,” he said. “It’s happening: Medicare is being privatized by Medicare Advantage, any way you slice it.”

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