Traditional Medicare may be changing as the government program may be moving toward privatization — with health care managed by private equity or large insurance companies — by as soon as next year. These potential moves mean advisors should help clients heading into retirement understand how this could impact the future funding, and quality, of their health care.
Today there are two types of Medicare options. The first is a fee-for-service program, or traditional Medicare, which a majority of retirees use. Traditional Medicare is accepted by most doctors but does not cover services like dental and vision care. Retirees can purchase a separate Medigap plan to cover those expenses.
The second is Medicare Advantage, a managed-care solution administered by private companies. Medicare Advantage plans may cover services like dental or vision but typically have more limited provider networks. Think HMOs. This option has been growing in popularity.
"The distinctions between the two options will soon begin to blur, however, if a plan to change Medicare goes forward," Mark Miller wrote in April for Morningstar.
In February, the Centers for Medicare & Medicaid Services (CMS) announced changes to the traditional Medicare program that could take place as soon as Jan. 1, 2023.
Through a structure called accountable care organizations, physicians and other health care providers will "join together" to manage the quality and total costs of care for each patient, the CMS explained. The hope is these responsibilities encourage providers "to coordinate the services across clinicians and care settings."
A key goal of this model — formerly called the Global and Professional Direct Contracting model and recently renamed the Accountable Care Organization Realizing Equity, Access, and Community Health, or ACO REACH, model — is to improve overall care for Medicare patients, especially those in "underserved communities," the CMS explained.
"This approach affords patients greater individualized attention to their specific health care needs while preserving choice of providers and all other services and flexibilities in Traditional Medicare," it said in the notice.
Critics say the change moves Medicare toward privatization, as "CMS plans to enroll everyone in this new model by the end of this decade — and as early as next year, in some cases — without prior consent," Miller writes.
Advantage for Whom?
Medicare Advantage has garnered 42% of Medicare enrollees, so it shouldn't be looked upon as a bad option, proponents have said. But moving traditional Medicare into private companies that may worry more about the bottom line than the patient is what concerns many.
In March, AARP sent a letter to CMS regarding the 2023 policy and technical changes to Medicare Advantage, stating: "We are committed to ensuring that older Americans have and maintain affordable access to high-quality health care and ensuring that the beneficiary's perspective is a key component of care delivery. The importance of this commitment is magnified as we have seen enrollment trends increasingly favor [Medicare Advantage] over the last several years."
In a Jan. 5 letter to the Department of Health and Human Services and CMS, 54 members of Congress asked the departments to end the use of direct contracting models within traditional Medicare by July 1.
The reason: The program's direct contracting entities "are privately owned and controlled coverage networks in which for-profit companies are paid monthly to cover beneficiaries' healthcare. Any funds left over after it covers care are kept as profits creating a perverse motive to decrease the quality and volume of seniors' care."
More blunt about their concern for the ACO REACH program was a group of 250 health care entities, under the banner Physicians for a National Health Program, which in a March 8 letter to HHS and CMS wrote:
"REACH retains the most dangerous elements of Direct Contracting, and under the guise of promoting equity, provides even more opportunities for middlemen to profit at the expense of beneficiaries and the Medicare Trust Fund. If allowed to continue, REACH would completely transform Traditional Medicare by allowing third-party middlemen to manage seniors' care, without seniors' full understanding or consent."
