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If you want to better understand one of the major issues facing the US healthcare system, watch your TV and mail each Fall. In a word choice. No wonder people are confused when they are on Medicare.
Why should we need companies whose purpose is to help seniors make choices and why should new choices be encouraged each year? Why is insurance for healthcare bills that complicated and confusing?
Nobody can accurately assess the risk they face from health care costs, they typically over estimate that risk. They surely can’t predict prescriptions they may take in the coming year. They don’t balance the coverage and probable out of pocket costs with the premiums, often wasting money.
Choice may be fine with investments, not when it comes to health insurance. There are too many variables and the very insurance concept of pooled risk is at risk because of adverse selection, in part when people think they should only buy insurance when they need it.
Medicare Advantage was a nod to the insurance industry. The Medicare Payment Advisory Commission (MedPAC), the independent congressional agency that advises Congress on Medicare payment policy, consistently finds that federal payments to MA plans exceed what Medicare would spend if the same beneficiaries were in traditional Medicare. For 2026, MedPAC estimates payments are about 14% higher, or roughly $76 billion more – partly because of adverse selection and partly from diagnosis coding games.
This confusion and cost shifting is not unique to seniors. Employers are increasingly shifting costs to workers in the form of higher OOP costs and higher premium sharing.
Why are Americans unable to grasp the advantage of one large insurance risk pool for every American? Everyone in the pool!
I agree, and oddly, Medicare agreed back in the late 1960s when they standardized Medigap plans to the 10 letter plans we have today.
Medicare Part D plans are obnoxious. Since each pharmacy has its unique contract pricing from suppliers and insurance companies, two people with the same scripts at the same pharmacy pay different prices. If they go across the street to the next pharmacy, they will find two more unique prices. Since formularies diff from plan to plan, the viable choices available to one person become quite limited. A standardized formulary seems necessary.
Medicare Advantage is the third attempt by Medicare to allowed private insurance as an option. Each time, we have seen it become economical ineffective. That is happening today with Medicare Advantage.
Geography also limits MA plan effectiveness. For example, the island of Manhattan has about 30 hospitals and thousands of doctors. Here a network is pretty easy to access. Now come to rural Iowa and the network has 1 hospital and 3 doctors. Need a specialist, ok, it might be in the next state or further. Combine that with the closing of rural hospitals and closing services that are not profitable and an MA plan is not viable as the Medicare safety net.
Your statement “They surely can’t predict prescriptions they may take in the coming year” is often true for many but for those with a high cost drug that you know you will be taking for as long as you are drawing breath the math may be simple when the total out of pocket expense including a high part D monthly premium is substantially less than the cost if you do not have such insurance coverage or if the high cost drug is not in the drugs covered by a low premium plan.
The drug plan finder at Medicare.com helps me review and make an informed decision. For 2027 coverage the time is now through December 7.
But you do not know if that drug will remain in the formulary of the plan you select. While Part D plans are required to offer a drug in each drug class, it doesn’t have to be the one you are prescribed. There is no standard formulary for all Part D plans and there should be. Even if you are permanently on one drug that is not to say others may not be added.
My wife is a young 65. She takes no medication and is in superb shape. So, when the time came to pick her Part D drug plan (we have traditional Medicare and a Part G supplement for her), the only logical choice was to find the cheapest premium plan. If she were to be diagnosed with something, we could deal with a cruddy plan and medication costs for, at most, a few months. And the following year, we could upgrade her plan if needed.
Adverse selection, Dick? Yes. But, unlike life or disability insurance, we’re not concerned about the parade of horribles for being underinsured on drug costs. Significantly different issues for folks on long-term maintenance meds or undergoing serious medical conditions (chemotherapy, etc.). Yup, the system is skewed and likely unsustainable.