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Medicare Advantage: A good investment

by on Jan. 02, 2012, under Health

Medicare Advantage is the privatization of Medicare. Medicare Advantage will be killed by Obamacare, which reduces payments to these private Medicare plans.  Or will it?

In actuality, insurance companies that are highly involved in Medicare Advantage did very well in 2011, as CNN recently reported.

Among the top-performing Fortune 500 stocks of 2011, three – WellCare Health Plans (WCG, Fortune 500), Humana (HUM, Fortune 500), and Centene (CNC, Fortune 500) — were health insurers with a high proportion of Medicare Advantage enrollees. WellCare’s share price has nearly doubled while Humana and Centene are up about 50%.

UnitedHealth Group (UHC) and Aetna (AET, Fortune 500), each with significant shares of Medicare Advantage patients, also inked gains of more than 35% in 2011.

WellCare’s enrollments jumped 10% in the third quarter, mostly due to an increase in Medicare Advantage members. The increase helped the firm nearly double its third-quarter profits and raise its 2012 outlook.

Humana also reported an 11% jump in third quarter revenue and boosted its 2012 earnings-per-share outlook by roughly 56% after enrollment outpaced the company’s earlier forecasts.

So what do these insurance companies and their investors know that we, the general public, don’t know?  Who would think health insurance companies would be such a good investment with Obamacare already in place in some areas (no co-pays for preventive screenings; children up to age 26 allowed to stay on their parents’ employer health insurance plans; reduced payments to Medicare Advantage) and Obamacare lurking on the horizon in others (the mandate; a limit on companies administrative costs, including profit)?

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  • http://byrondennis.typepad.com/masshealthstats/ Dennis Byron

    I don’t know about investors but one thing we seniors understand that the general public and the blogger who wrote the above does not know is how Medicare really works.  It is incorrect and very confusing to us seniors to say:
    “Medicare Advantage is the privatization of Medicare.”
    Medicare Part C Medicare Advantage policies are government run in exactly the same way as the traditional Medicare Program Parts A and B. That’s why Part C Medicare Advantage is called a “Part” of Medicare. Part C policies are no more private than Part A and B policies. (Of course, Parts A, B and C are also private in the sense that they are run by private insurers under contract to the government.)
    Those seniors that don’t choose Part C still buy the insurance they really need, such as AARP or Blue Cross (depending on state) Medigap plans. These plans are actually private in the way the blogger is using the term.  Medicare Advantage is not.

    If Medicare beneficiaries take only Parts A and B,  they have lifetime limits, large co-pays and deductibles, no dental/vision/drug/physical-exam coverage, and geographic limits. That’s why over 90% choose a truly private Medigap plan, a Part C Medicare Advantage (which you call private) or some truly private former-employer-sponsored insurance plan.
    While the lefties talk to each other about private vs. public, 92% of us seniors have already voted for private with our pocketbooks.

  • medicareblogger

    Dennis:  Medicare Advantage plans are “private Medicare plans” run by insurance companies, which are mostly for-profit companies.  Medicare subcontracts to these “private plans” which then provide Medicare benefits in a way that is different from “Orginal Medicare.” Some Medicare Advantage plans are run by not-for-profit organizations.
     
    Medicare Advantage plans are not “government run”.  They are run by insurance companies, with most being “for-profit companies”
     
    Parts A and B are parts of Medicare. Part C is Medicare Advantage, under which  insurance companies are paid a lot of money by Medicare to deliver Medicare services in a way that is different from original Medicare. These are “private plans” and thus the “privatization of Medicare”.
     
    Medicare supplements work along side Medicare and fill the gaps.  They are also provided through insurance companies, but these are not substitutes for Medicare.  They are “supplements to Medicare”.
     
    Dennis Byron, the commentator seems very confused about the various options for Medicare coverage.  If you read through my many blog posts, you will get a better understanding of your Medicare choices – and that 15% of Medicare beneficiaries across the country are in “private Medicare plans”, aka “Medicare Advantage”.

    • Dennis Byron

      Sorry but I am not all confused and as I said it is you that does not understand Medicare.

      You are correct that the Centers for Medicare/Medicaid Services (CMS) “subcontracts” — to use your word, which I don’t think is legally correct but it’s your blog – and pays a lot of money to private insurers (for profit or not profit, doesn’t matter) to run Part C Medicare Advantage plans.  However, and this is the point you miss (or are purposely misleading senior citizens about?), CMS also subcontracts with and pays a lot of money to private insurance companies (some for profit, some not, doesn’t matter) to run Part A and B plans. 

      A, B and C are all “Parts” of Medicare.  “Part” means Part of Medicare. CMS contracts for the admin, claims work, etc. for all Parts of Medicare. The distinction you are making between private and government run for Parts A, B and C is simply irrelevant and misleading to senior citizens.  All Parts of Medicare – including Part D Standalone Prescription Drug Plans — are both private and government run, to use your terms. (The government is the payer to be more precise in the same way that large companies self insure and give their company’s claims, admin, etc. work to insurance companies.)

      The key point is that the word “private” does not matter.  You are misleading seniors by using it only in reference to Part C. (By the way, 25% of us Medicare beneficiaries nationwide choose Part C, not 15%.) Part C is Medicare, just as much as Parts A and B are Medicare.  You should not scare seniors away from it. I am not sure why you are doing that.

      As for the other 75%, 92% of us choose supplemental insurance from a Medigap plan or a former employer (union, association, etc.) because Parts A and B Medicare alone are terrible insurance.  So overall, more than 90% of Medicare beneficiaries choose a private — to use your term — approach.

      This supplemental insurance IS truly private in the sense you are using the word “private” (but again, the term is irrelevant).  However, Medigap plans are highly regulated by state insurance commissioners and/or CMS. Also whether a senior supplements Parts A and B with Medicare’s own Part C or with a truly private plan such as a Medigap play, the senior almost always has to have Parts A and B first  (there are some rare exceptions for some former employer/union/assoication plans).

      [You introduce and put in bold the concept “different from Original Medicare” in your comment even though those words are not in your blog post. I am not sure where you are going with that but of course it is different: A is different than B, C and D. B is different than A, C and D. C is different from A, B and D… But none is more or less private or more or less government run than the other.  They are all Parts of Medicare.)

  • medicareblogger

    Dennis:  Your view of Medicare sounds familiar and I think we’ve gone around and around on this topic before, perhaps on some other forum. The issue with Medicare Advantage plans being run by for-profit insurance companies is that they cost more to administer than Original Medicare and they use Medicare money to pay for multi-million dollar management salaries and profits.

    I’ll offer one last bit of information to counter your claims that Medicare Advantage plans are no different than Medicare. 

    From the 2011 Medicare and You handbook:
    Medicare pays a fixed amount for your care every month to the companies offering Medicare Advantage Plans. These companies must follow rules set by Medicare. However, each Medicare Advantage Plan can charge different out-of-pocket costs and have different rules for how you get services (like whether you need a referral to see a specialist or if you have to go to only doctors, facilities, or suppliers that belong to the plan for non‑emergency or non‑urgent care). These rules can change each year.

    This information clearly states that Medicare Advantage delivers Medicare services in a way that is different from “Original Medicare”. 

  • http://mymedigapconsultant.com NC Medicare

    The issue I find with MA plans are that most seniors who sign up for them typically want out of them once they start making claims.  MA plans also have so many variables.  Coverages will change, max out of pockets will change, networks can change radically each year.  In one NC county in 2011 offered 20 plans and 7 carriers.  In 2012 there are 4 plans and 2 carriers. 

    Seniors typically don’t like surprises.  Those on fixed incomes really do not like surprises.  MA plans are great for a last option, but if you can afford a medigap plan, we recommend you get one.   Funny thing is, most companies pay more commissions to sign a senior up on a MA plan.  I believe in doing the best thing for my clients, so we recommend medigap plans.  We make less in commissions, but we sleep well knowing our clients are better protected.
    Thanks
    Heather

    • http://byrondennis.typepad.com/masshealthstats/ Dennis Byron

      @NCmedicare

      I agree with your second point/paragraph but not your first.

      I agree seniors don’t like surprises and I think you agree that that’s what they will get if they don’t have employer-sponsored retiree insurance or Medigap or Part C.  Typically but not always if they have employer sponsored retiree insurance, they won’t look at the next two options. Then, whether a Plan C choice is better than a Medigap choice depends on where they live most of the year, if they “migrate” from north to south or west during the winter, their philosophy on HMOs, etc.  It’s their choice.

      That’s where I disagree with you.  I think seniors like choice, not government dictate.

  • http://www.MediNews360.com Cindy Boomer

    Do not go with Medicare Advantage!  Medicare Advantage is practically the same as medicare insurance in terms of coverage… therefore the gaps in coverage that exist in Medicare, also exist in Medicare Advantage! Also, with Medicare Advantage you are limited to a specific set of doctors and physicians, taking away your ability to choose your medical physician and putting it all in the hands of the insurance companies… Your best medicare supplement insurance today would be a Medigap plan.

  • medicareblogger

    Medicare has no cap on a person’s 20% coinsurance while Medicare Advantage plans all have an annual maximum out-of-pocket. So Medicare Advantage is different from just Medicare.  And if a person is reluctant to pay for a Medicare supplement plus a Part D plan, they are better off with Medicare Advantage as opposed to going with Medicare alone

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