Medicare is in worse shape than we thought

Hey there —

In the next week, at least two million seniors will get letters telling them their Medicare plan is going away — and they may not have great options to replace it. The same thing happened to almost three million people last year. It wasn’t pretty. 

Experts say this is a new trend, and the dynamics behind it will ultimately affect everybody who’s on Medicare — or hopes to be someday.

That’s the scoop from today’s new episode. I’ll sum up below but you’re going to want to listen. My colleague Emily Pisacreta, An Arm and a Leg’s senior producer, has packed this story with the voices and stories of everyday heroes who stepped up to help their neighbors whose plans went away in Minnesota last year. 

And in addition to being admirable, some of these folks are incredibly charming. 

So, go enjoy. And meanwhile, here’s a rundown of the need-to-know, kinda-scary stuff. Starting with…  

The problems we already knew about

Today’s story builds on what we found when we took our first deep dive on Medicare. 

Reporting that story kind of blew our minds, and not in a great way. Medicare has so many complications — and potential pitfalls. 

(If you’re anywhere near age 65, this is need-to-know stuff, so we wrote it up in a pair of First Aid Kit newsletters: Here’s part 1 and part 2.) 

Enrolling in Medicare starts with a high-stakes decision — with virtually no “undo” button: choosing between “traditional Medicare,” run by the federal government, and “Medicare Advantage” plans run by private insurance companies.

Medicare Advantage plans offer big upsides: Lower monthly premiums (yes, Medicare has premiums), and stuff that traditional, government-run Medicare doesn’t cover — including vision, dental, and hearing care. 

But they also can expose you to big risks: Insurance companies can decline to cover meds and treatment. And when they do approve treatments, finding a provider who takes your plan can be a huge challenge.

And for most people, if those problems pop up, there’s not much recourse. Choosing Medicare Advantage is generally a “no-backsies” situation.”  

So, that’s where we started. 

Now there’s a new risk

Medicare Advantage plans can disappear without a comparable replacement. 

That’s what Emily found when she talked with those everyday heroes who stepped up to help their neighbors last fall, when hundreds of thousands of Minnesota seniors found out their Medicare Advantage plans were about to go poof.

The Medicare Advantage plans that weren’t going away tended to be more expensive. And to cover less. 

These folks did get another option — one they wouldn’t have otherwise had: Leaving Medicare Advantage and signing up for traditional Medicare, as if they were 65 all over again. 

Except, for the most part, they didn’t. For the same reason they hadn’t chosen traditional Medicare in the first place: They couldn’t afford to.

Because traditional Medicare has big gaps — gaps that cost money to fill. 

Most importantly, it only covers 80 percent of outpatient health care: doctor visits, x-rays, infusions, physical therapy, x-rays and MRIs, outpatient surgery, you-name-it.  

You’re on the hook for the other 20 percent — which, given how much everything costs, can add up to thousands and thousands of dollars — without any out-of-pocket limit. 

The only solution is to buy a supplemental insurance policy — people call them medigap plans — and they’ve gotten expensive. The average is now more than $200 a month, and growing. 

So the helpers Emily talked to in Minnesota all said: The folks they were helping last year, people whose Medicare Advantage plans were disappearing, generally just stuck with Medicare Advantage. 

Even though their Medicare Advantage options had gotten both crummier and more expensive. 

Which leads us to the systemic issue, the reason these problems will only get worse.

Insurance-company profits are baked into Medicare

All of Medicare. Not just Medicare Advantage — traditional Medicare too, because you need a medigap policy, and those are run by private insurers too. 

(Oh, and, you probably knew this, but: Every part of Medicare’s prescription-drug benefit is also run by private companies.) 

And insurance companies, by definition, won’t do anything unless they’re sure there’s a profit.

If a Medicare Advantage plan doesn’t look profitable for them, they can just end it — as millions of people found out last year and millions more are about to find out.

And the price of a medigap policy is always going to reflect what the insurer thinks they’ll pay out, on average… plus a profit. 

Health care prices will keep growing, so medigap premiums will keep growing too. They’ll keep getting less affordable. Experts expect more folks to get pushed into Medicare Advantage. 

…which would expose more seniors to Medicare Advantage’s pitfalls. And also cost us all more in federal dollars. Experts found that Medicare Advantage costs 14% more per enrollee than traditional Medicare.

This seems like an unsustainable path for a program we think of as… what we want health care to look like. Affordable. Accessible. That’s why “Medicare for All” is such a popular slogan. 

So, would Medicare for All just amplify this crap?

Its proponents say: Nope. Because their vision — as described in the Medicare for All Act languishing in Congress — doesn’t just expand Medicare. It eliminates the role of private insurance companies and almost all out-of-pocket costs. 

Researchers at Yale recently did the math on how that would price out. They found it would save more than a trillion dollars a year — and prevent 114,000 deaths. Every year. 

People can disagree about that vision — our colleague Julie Rovner has a fascinating podcast series called How Would You Fix It? — but I don’t think wholesale change is coming soon. 

So in this long meantime, I’m going to stay focused on what we can do right now — for ourselves, for our neighbors, and with our fellow citizens. There’s so much to learn and share and do.

Speaking of which… 

Some crucial Medicare resources to save or share

Our two-part guide to avoiding Medicare’s biggest pitfalls sums up what we’ve learned — and what you need to know Part One and Part Two. 

No time to read it all? Here are the three biggest tips:

1. Whenever we cover Medicare, there’s one resource every expert points to: they’re called SHIPs, which stands for state health insurance assistance programs. They’re free, unbiased, and reachable in every state.

Find your state’s SHIP chapter here.

But be aware: you might have to wait on hold — especially if insurance companies are dumping a lot of Medicare Advantage plans in your area.

2. Also great: The nonprofit Medicare Rights Center has a national helpline: 800-333-4114.  They also have a well-organized library of online guides. User-friendly and deep.

3. Insurance brokers can also be great. Be sure to get one you can trust. Because they make money from commissions, it won’t cost you any money to work with one. But that also means brokers have an incentive to push clients into plans that pay the highest commissions. 

Smart people tell us that a good way to find a helpful, unbiased broker is to ask them whether they sell all or most of the plans available in your area, so you can get the full scope of your options. 

Thanks for hanging with us. You’re the best company we could possibly have in this long meantime.

— Dan