When Will Medicare MSAs Take Off?
(Today’s Health Alert was written by Greg Scandlen.)
As most readers of this blog know, I have been uninsured since January 2011. As I said in a post last year:
I was hit with a 19% rate increase thanks to ObamaCare. All those “enhanced” benefits like free preventive care, unlimited lifetime benefits, and paying for 26-year-old slackers came with a cost. In my case it was more money than I could afford now that I am retired. So, bye-bye, BlueCross.
I have saved a whole lot of money (about $9,000) and paid for my few medical expenses (doctor’s visits and BP meds) out of my existing HSA. If anything big happened I would have signed up for Pennsylvania’s federally subsidized high-risk pool, but that never became an issue.
I will turn 65 in June, so now I am being solicited by various health plans to sign up for their Medigap coverage. I just received one such offer from Geisinger. The descriptions of their Medigap options run for ten pages and include seven different plans with monthly premiums for men ranging from $51.56 to $253.62, depending on age, county, and plan. These premiums are on top of the Part B premium of $99.90 and, of course, on top of whatever Part D (prescription drug) coverage is chosen.
I’ve been cheated, been mistreated
When will I be loved?
The last two pages of the brochure describe their Medical Savings Account (MSA) option. This is actually a Medicare Advantage program, so it replaces all of the Medicare benefits; it doesn’t just supplement existing Medicare. Wow! Zero premiums beyond the Part B and Part D premiums, I would have to pay anyway. It has a $3,000 deductible, but the plan deposits $1,500 in my MSA each January. There is 100% coverage after the deductible is met. Complete rollover and buildup of unused MSA amounts. And the MSA balance will be part of my estate when I die. See here for a plan description.
Even if I consumed my entire deductible every year, the $1,500 I would have to pay is only $125/month — far less than the cost of almost all of the Medigap options. In fact, the cheapest option in my area is Plan F-HD, ranging from $51.46 at age 65 to $85.24 at age 77, but that includes a $2,000 deductible with no federal contribution. That $2,000 works out to $167/month.
This is a complete no brainer. Not only is it more affordable for the enrollee, but it is far more understandable. It does away with Medicare’s archaic division between Parts A (hospitalization) and Parts B (medical), each with its own deductibles, coinsurance, and benefits limitations which must then be supplemented with a private and expensive Medigap policy.
A friend of mine has been in a Medicare MSA for five years and this is what she loves most about the program. It is easy to understand and once you pay the deductible you are covered 100%. No endless 20% coinsurance. No day limit on hospitalization or SNF care.
The only question is why isn’t it more available? Several carriers have offered and dropped their MSA offerings because enrollment was paltry. It has always been very hard to find out any information about Medicare MSAs and they simply aren’t available in most states (Geisinger operates only in Pennsylvania.)
Dr. Phil Gausewitz and I coauthored a paper seven years ago suggesting that all of Medicare be revised according to this model.
Obviously that hasn’t happened, possibly because AARP makes so much money selling Medigap policies. But now I see that Senators Tom Coburn and Richard Burr have cosponsored a bill that includes an across-the-board deductible for Medicare. See the plan summary, our previous post and an article in The Hill.
I haven’t had a chance yet to review their proposal, but I hope they include an MSA to offset the deductible.
In the meantime, if you are eligible for Medicare and can find an MSA in your area, you really should look into it.
Greg: In your Medicare Advantage MSA, if you want to go to the Mayo Clinic or the Cleveland Clinic or the Massuchusetts General Hospital, or MD Anderson Hospital in Houston, what happens? Do you have full freedom of choice and tranportability?
Hey Greg,
You may recall that I made an effort to market these plans a few years ago – working with a cash based doc on Hilton Head Island, SC. While I concur with all that you say (surprise!) the challenge is one of massive communication.
This is a retirement community made of up smart, informed, and rich, financially sophisticated people. When the doc sent his letter to patients informing them of his leaving Medicare and starting a cash based practice, we included an invitation to a seminar to explain the Medicare HSA available at the time. We also included highlights of the plan and a pretty decent explanation with reference to websites, etc.
Bottom line – so few takers that we could not justify the cost of the seminar so we cancelled. Most of his patients were upset and bereft to think that they would not be able to go to him any more. But they just had to have a Medicare doc – all of the other physician on the island are participating as one might surmise. The Medicare mindset is truly all encompassing and powerful. Basically I am telling you that if you say to 1000 rich smart and knowledgable seniors, 950 will tell you that without Medicare there is no healthcare.
All of this to say that the challenge to undo years of crap ingrained in the heads of our citizenry is a pretty substantial one. And, as you say, there is no way that AARP wants any part of this deal, nor do the insurance carriers. I am an optimist by nature and profession, but I am not sure we have the time to get this challenge handled.
Right now I think our only hope is to “mothball” this idea (Queen Kathy and her minions will certainly end it if Obama is re-elected) and bring it back when the inevitable failure of Obamacare arrives.
RAM
Very interesting analysis. Greg: since this is Medicare Advantage, is it limited to Geisinger’s service area or is it national?
Brant, the underlying system for physician payment is exactly the same as for traditional Medicare, so however those clinics are paid under traditional Medicare would be the same, except the first $3,000 is my responsibility.
Dick, it is always hard to get people to change, but that is why the emphasis should be on new enrollees like me and my friend. I think that is true of any change in Medicare — don’t sweat the existing folks, concentrate on the newbies. Especially now that so many people are familiar with under-65 HSAs. After 10 years that amounts to a whole lot of people.
Hopefully if the Senate turns GOP we will see better prospects for these bills. The numbers add up.
Many years ago, I was diagnosed with metastatic cancer that involved surgery and extensive radiation. That was over 20 years ago. A few months later an offer came from my insurer to “buy my policy” from me for $1000. A year or so later my policy was cancelled.
This forced me to have to approach doctors and hospitals with my predicament, and an offer to just pay cash. I was pleasantly surprised that I could negotiate a “cash at the time of billing,” arrangement for a discount of 30-50%. Naturally I was grateful and always sent a thank you letter to the doctors. I always thanked them i9mmensely for taking care of me with concern. I was a cash and carry patient, and they avoided insurance companies cutting their fees.
I think it will take a generation to get pre-seniors to go to a cash or high deductible system. Doctors are depreciated by many things, like being providers, “doc fix” held over their heads, and criminalization by emphasizing fraud ECT.
I still appreciate doctors and try to give them meaningful gifts. Doctors have become an employer hand out and a government ben3efit and are just names on a list. I have an appreciative relationship with doctors that is mutual.
Doctors need appreciation not depreciation. I am a believer in the patient paying the doctor to get care and attention.
The only thing inhibiting seniors from jumping on medical savings accounts is: 1) the highly subsidized nature of traditional Medicare; and 2) the notion that people should not have to shop for medical care; nor should they have to pay anything out of pocket.
Interesting. I had no idea.
Dear Greg,
You know that I am a proponent of high deductible plans. However, since the Medicare Advantage program is a contracted plan between CMS and the private insurance carrier and the contract is given out only for one year, my concern is that government bureacrats determine reimbursements, MLR and a myriad of rules for brokers who try and help their clients. There is also a lack of communication from the Medicare Advantage insurance companies to the client’s agent on things like late premiums, billing errors and other non-health related service issues.
With supplements the carriers still work with the agent and the lack of a government subsidy to the carrier means less government control over operational matters.
Devon, actually traditional Medicare is a whole lot more expensive to the bennie than the MSA is. It amazes me that the people who always criticize private insurance for high OOP costs and confusing procedures have no similar criticism of Medicare.
Greg, How do your kids and grandkids feel about paying 75% of the healthcare costs for their parents/grandparents? They struggle to pay their own health care costs and send their kids to college, yet have to subsidize their parents health care???
What kind of system would have parents raise their kids, then turn around and tax them to pay for the parents healthcare? We are proud to support and raise our kids, I’d rather have a system that we cover our own healthcare costs, not double tax out kids/grandkids, etc.
BTW – I like you idea of MSA(HSA’s) for Medicare, just frustrated with the cost shifting and double taxation of my kids/grandkids.
Among the amazing facts about this topic is how much the government interferes in private healthcare decisions yet the beneficiary and many providers want the government to stay involved and to cover more people.
For those that respect what HSAs can do, pick up the recent books by Sally Pipes, as she is an advocate and does an excellent job of dissecting Obamacare.
I’m a Medicare patient with Medicare Advantage plan which has caused me to have to change several of my doctors because they are not in the medical group that is the core of the plan. Moreover, I must go to a different Radiology department, completely across the city.
However, I have seven chronic conditions that seem to require a specialist for each one, so there is literally no way to get cost-effective care for me relative to the premiums; my plan is definitely losing money on me now, and I am actually under control, not acute.
But one of the most dangerous effects of a Federal health plan, either Medicare or Medicaid, is how it under-pays for the care received and thus drives up the cost of private insurance, whereupon the Feds accuse the private health plans of raising prices more than they should. This has been a sick relationship since 1965.
A new book that speaks to the variety of insurance problems and their solutions is Maura Carley’s–Traps and Gaps…available on Amazon. She really knows her stuff as she operates a company that assists patients and families with conflicts with their insurers and providers.
Wanda J.Jones, MPH
San Francisco
Greg, these type of Medicare plans are indeed scarce. I could not find a single MSA/HSA offering in Texas. Mr. Matthews pointed out some of the frustration of trying to penetrate almost 50 years of Medicare dumbing down, but I am still curious as to why these plans are not available everywhere in the U.S. It seems like we had discussions about this in previous years, but I can’t recall the gist of them. Based upon your posts here there aren’t issues of “not enough participating doctors”, and I would think the premiums could be competitive. I don’t get it.
Greg,
You did not mention Medicare Advantage (Part C) as an option, as you enter your next phase in life. It is not a Supplement to Medicare, but replaces both Medicare and the Supplement. It usually includes Part D, instead of having to purchase it separately.
My wife recently turned age 65 and chose Medicate Advantage with the Part D. She pays a $25 Co-Pay for doctor visits and $210 Co-Pay if admitted to a Hospital.
Maximum out of pocket annually: $3400. Annual Premium: $-0-
It uses the $99 Part B you pay monthly to the Govt as the premium.
This is a great opportunity for you since you have the HSA account for Co-Pays. For those entering Medicare years with a well-funded HSA, basically they have an MSA.
The reason HSA’s are not as popular yet, has to do with ignorance. Not all companies offer it. Not all companies offer the 100% Co-insurance after the deductible. Insurance Salesmen have not explained it well enough. The public does not like the idea of having to pay both an insurance premium and pay into the HSA account. They do not recognize the value of that additional tax deduction every year. Most businessmen recognize the benefits.
Most of the HSA’s are group plans. It does not help that ObamaCare appears to eliminate that tax deduction.
And everyone is waiting to see what happens next.
Between that wait and grandfathering, there is little activity in the Health Ins Market right now. Not that Grandfathering is such a hot idea, but the Govt implies that it is.
I flush AARP several times daily.
If you think things are an ignorant mess now, wait until us agents are no longer part of the equation.
Greg,
The problem you are seeing, is that most baby boomers have been brought up with the idea that someone else should pay for their healthcare. I have written an e-book about this giving the history of how this happen and why it is so ingrained now. Third party payer system is the problem. I call it health care delivery system. Until people learn that when someone else pays they control it. Thanks for bring this issue up, it needs to be brought out and we all need to become better healthcare consumers.
Andy Edley
Randy, the Medicare MSA IS a Medicare Advantage plan.
Frank, I think most of the carriers would rather sell Medigap.
Patrick and Andy, amen to both your comments.
I believe the reason there are few carriers willing to sell medicare MSAs is that these are ‘100 percent’ plans with poor actuarial performance. Greg, you cite this as a virtue. The problem is in Medicare’s world of guaranteed issue, someone with large and predictable expenses would burn through the deductible and after that pay nothing. There would be no incentive to control costs. These ‘100 percent’ plans are also disappearing in the commercial (under 65) HSA market.
They are available through Coventry in KS. My mom has one and loves it.
Greg, your original 2005 MSA/HSA for Medicare looks like the best.
I have read only enought of Burr-Coburn to see that the “FFS medicine” is vilified (the first sniff test failure), that “Plans bidding” (i.e., patient capitation auctions) is their game, and balance billing is never mentioned while prices of services are fixed–the old expensive Managed Care city with high deductibles (tell me I am wrong). The “choice of a FFS plan (i.e., a PPO, I presome) vs. and HMO is nothing but one HMO bidding against another.
Putting money into the hands of patients with an income adjusted HSA as a fed contribution plus a major med premium paid by the feds–in other words your 2005 program, is a much better plan than Burr Coburn.
Thanks, Bob
Greg, you made my day! I have been trying to make the case for Medicare Advantage Plans that partner with a local Care Coordination company. We definitely need legislation that incentivizes Health Plans to offer an MSA and which provides a tax deduction for preseniors (35-64) to fund the global deductible ($2,500 per year)that will be needed in order to fund the Baby boomers that are now turning 65. Its a simple formula to save Medicare and stop the red ink. It works. My financially integrated IPA/Care Coordination company runs a consistent MLR of 65% for our HMO Health PLan partners and we share these profits with our doctors who provide the Patient Centered Medical Home (PCMH)services that we require. It is a “patient/physician relationship” centered philosophy that works. Our patients can go get care anywhere they want to and the Providers will receive 100% of Medicare fee schedule. However, most of our patients stick to our Network Providers who their PCMH PCP refers them to because they trust their PCP. Is anyone listening???
Jeez, Greg, after I turned 65, it took me 18 months to sort out all the Medicare plans and parts, and medigap insurance. Now you tell me to chuck it all, and re-apply for an MSA, which despite your enthusiasm I am sure will entail many months more of study, misunderstanding, phone trees and futile searching at medicare.gov. I don’t have that much time left to live. Arrrgh!
Greg, the MSA approach that you describe should clearly be the model for Medicare in the future.
By coincidence, I happened across an article from 2007 by Rettenmaier and Saving, writing for Heritage, that recommended this exact approach.
I do however feel some sadness when I read your post, for this reason:
— a 64 year old in the individual market is driven toward high-deductible policies that still have huge premium increases, and no one is putting free money into their HSA. My own policy age 64 costs $600 a month and has a $2,500 deductible plus 20% coinsurance. Most of the persons nationwide who go bankrupt from health care actually have insurance — but they have a high deductible and little or no savings to handle the deductible.
Yet at age 65, the same insurance companies who recently shunned the 64 year olds, suddenly turn around and are eager to sell the new senior citizen a very decent policy- with no underwriting, and in fact with free money to their MSA.
Of course it is entirely the result of $20 billion plus in federal subsidies to Medicare Advantage carriers, plus Risk Adjustment schemes which quietly add more federal dollars.
And while I do not like much of ObamaCare, I get very annoyed when senior citizens are “stoked up” by people like Palin and Gingrich to complain that Obama is pushing ‘socialized medicine.’ The seniors are the one group in the country that actually has socialized medicine, and they love it for obvious reasons.
The 64 year olds are being kicked around by the revered free market. The 65-year olds are protected in almost every aspect of health care. None of the Republican candidates have the guts to explore this, although I admit that irony and theory are rarely found on any campaign trail. You would need a William Buckley or a Norman Mailer to capture this particular violation of conservative political theology.
It comes down to the fact that seniors vote in large blocs, and so politicians throw benefits at them. Obama was philosophically correct to try and throw some benefits at younger workers, just purely out of fairness, but he was too clumsy in the minefield of national health policy.
Bob Hertz, The Health Care Crusade
Bob Hertz, before you extoll the righteousness of the socialist left wing philosophy, please check the historical track record on government price fixing for any good or service both from the economic and social perspectives.
By the way, a black market being involved (like Canadians coming to the U.S. for medical care) means the price fixing is a failure regardless of the claimed internal results. The same holds true (from the social perspective) if people die of illness before being treated as in the case of the NHS in the UK.
Frank, I did not think I was praising the socialist philosophy.
What I was noting was the irony that so many members of America’s conservative parties get financial benefit from liberalism every day of their lives.
If an entrepreneur opposes socialized medicine, I give him full respect even if I disagree.
But until the Tea Party members burn their Medicare cards, I will be skeptical of their arguments.
Giving people rich benefits in exchange for their votes is a problem in many democracies. I do not have enough background in political science to know if this dooms democracies, or is it just something we have to live with.
For a long time I have listened to seniors who live like Swedes but vote like Milton Friedman. And I am not saying that Greg Scandlen is all wet, in fact he is a terrific writer. He may as well take Medicare when it is offered to him, as I will when I turn 65.
It is not good to have absolute “cliffs” cutoffs by age or income or nationality in social programs. Maybe that is something we can build on.
I agree with Andy, education is the problem. I’m an agent in MI and sold some MA-MSAs in 2006 & 2007 but there were few companies offering them, none now. Education has always been the problem when dealing with a higher deductible health plan. We have a generation with that old entitlement attitude.
Why is $2000 an unacceptably “high” amount when it comes to paying for our most precious possession (our health), when that same amount is paid without batting an eyelash when paying for our autos? Not to mention the tax advantages of the MA-MSA.
In MI we have BCBSM as our insurer of last resort. Created as Public Acts 102 & 102 in 1939 BCBSM is not a private company. They have to offer plans in each county. The MA plans they have available have small premiums and most include PDP as well as some vision, dental & hearing benefits. BCBSM offers no MA-MSA plans. Nost Medicae beneficiaries consider this a great deal.
Commercial carriers are only in selected counties and don’t offer MA-MSAs. I think all the commercial carriers in MI have been investigated with operations suspended since the MMA went into effect. Hard for an agent to have credibility with his client base.
I’m a great supporter of HSAs and Medicare MSAs. Changes with this health care political football come slowly. I forget, how many state and federal mandates do we have now? Has it topped 3000 yet?
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