Medicare Advantage plans will be paid less money by Medicare next year, and the year after that. The Affordable Care Act will limit Medicare Advantage administrative costs and profits to 15% of revenues (almost all it coming from Medicare). Democrats don’t like Medicare Advantage because it is seen as a movement to privatize Medicare by turning it over to insurance companies. Republicans have warned that Democrats want to kill Medicare Advantage and this will affect more than eleven million people who are enrolled in these plans around the country. Various studies have determined that Medicare Advantage is doomed to disappear due to funding reductions.

In Arizona, Medicare Advantage enrollment is very high. In Pima and Maricopa counties, 45% of Medicare beneficiaries are enrolled in Medicare Advantage. In Pinal County, the number is 49%.  People in Arizona should be worried about the future of Medicare Advantage.  Or should they?

Why are insurance companies investing in a business that is going out of business in a few years?

UnitedHealth Group Inc will acquire XLHealth Corp , “a company that specializes in plans for Medicare recipients with special needs, including chronic illness, and those low-income beneficiaries who also receive Medicaid government coverage”, according to a Reuters report.

According to Reuters:

XLHealth serves about 113,000 Medicare Advantage plan members in six U.S. states and is expanding into six more next year. It estimates its 2012 revenue will exceed $2 billion.

UnitedHealth is already one of the largest providers of Medicare Advantage plans, with 2.2 million members at the end of September. It expects total revenue to exceed $101 billion this year.

Medicare is an enticing market for U.S. health insurers, as the entry of the postwar baby boom generation into retirement looks to swell the ranks of privately run Medicare Advantage plans.

Such plans now account for 25 percent of Medicare enrollment, compared with 75 percent for government-run plans, but analysts expect that percentage to rise. Medicare beneficiaries can choose to receive their benefits through private health insurance plans.

Last month, Cigna Corp agreed to buy HealthSpring Inc for $3.8 billion as a way to expand its presence in the Medicare Advantage business.

Earlier this year, Wellpoint bought CareMore for nearly $ 800 million.

The largest insurance companies in the country seem to know something the rest of us don’t know.  And they seem pretty confident that Medicare Advantage will continue to be a profitable business in the future.

Here is some very interesting information from ThinkProgress.org

A new Commonwealth survey finds that the United States leads wealthy nations in the number of adults who can’t afford health care services and end up skipping care altogether. Forty-two percent of Americans with health issues chose to go without care, the survey found, compared to a range of 1 to 14 percent of adults in 10 other countries. Also, more than a quarter said they could not or had difficulty paying their medical debt.

The chart below demonstrates how the U.S. compares with the rest of the world:

When you spend the night in the hospital, you would assume you had been “admitted” to the hospital – but you could be wrong.  And this definition of your status could cost you thousands of dollars if your Medicare Advantage plan has a 20% co-pay for “outpatient surgery”.

I met last week with a man who went to Northwest Hospital to have stents put in his coronary arteries. Ralph spent about 24 hours in the hospital and he was  in a bed, in a room, overnight. So you would think he had been “admitted” to the hospital.

Ralph gave me copies of his bill from Northwest Hospital that showed his 24-hour stay cost $126,241.67!!!!

The biggest charge was $13,148 for “cardiology” services – and this charge was repeated 5 times on the bill.  I’m figuring he got five stents. The bill included a $3,049.01 charge for an “observation room”. And this “observation room” charge is why Ralph got burned.

Don’t have a heart attack,  Ralph didn’t have to pay that much.

The good news for Ralph, who is 86 years old, is that his Medicare Advantage plan had to pay only $14,093.04 of the $126,241.67 hospital bill. This is because Medicare sets the price for each service, and $14,093.04 was the total of approved charges for services associated with Ralph’s 24-hour hospital stay – or rather, his observation stay.

The $126,241 bill is a made up number – unless you don’t have insurance. Then this outrageous number is your starting point for negotiating how much you will pay for the medical care you received. This story is really about Ralph’s Medicare Advantage plan.

The bad news for Ralph is that his Medicare Advantage plan requires him to pay 20% for “outpatient surgery”, so he had to pay $2,814.48.

Medicare Advantage plans tell agents and brokers that a patient who goes into the hospital will pay only the in-hospital co-pay (which is $295 per day in Ralph’s plan). So I would have thought his bill would be $590. But because the bill says he was in an “observation room”, Ralph had to pay a lot more.

Something to consider with Medicare Advantage:

What is the charge for “outpatient surgery” in your plan, or the plan you are considering joining? Most plans have a set fee of $150, $175, or $275 dollars for outpatient surgery or services. But Ralph’s plan says he must pay 20% for any outpatient surgery or diagnostic tests.  So he is stuck with a big bill because of how his Medicare Advantage plan is designed – and because Northwest Hospital never admitted him.

Hospitals are routinely “not admitting” patients so they can charge more money to Medicare and patients.

According to an email I recently received:

The Center for Medicare Advocacy has heard increasingly about beneficiaries throughout the country whose entire stays in a hospital, including stays as long as 14 days, are classified by the hospital as outpatient observation.  In some instances, the beneficiaries’ physicians order their admission, but the hospital retroactively reverses the decision.  As a consequence of the classification of a hospital stay as outpatient observation (or of the reclassification of a hospital stay from inpatient care, covered by Medicare Part A, to outpatient care, covered by Medicare Part B), beneficiaries are charged for various services they received in the acute care hospital, including their prescription medications.

Skilled Nursing Facility (SNF) will not be paid by Medicare.

People on original Medicare have run into problems where a subsequent skilled nursing facility stay was not covered by Medicare because the patient was not admitted to the hospital and therefore did not  satisfy the statutory three-day inpatient hospital stay requirement. (NOTE: Medicare Advantage plans don’t require a 3-day stay in the hospital to get a skilled nursing facility stay covered by the plan.)

A class action lawsuit over “observation status”:

On November 3, 2011, the Center for Medicare Advocacy, and co-counsel National Senior Citizens Law Center, filed a lawsuit on behalf of seven individual plaintiffs from Connecticut, Massachusetts, and Texas who represent a nationwide class of people harmed by the illegal “observation status” policy and practice.

The case, Bagnall v. Sebelius (No. 3:11-cv-01703, D. Conn), states that the use of observation status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment to the Constitution.