You get what you pay for. It’s something we believe instinctively, often without much evidence to support it.
But paying more for the right Medicare Advantage plan can actually help you live longer.
A new study by scholars at Northwestern, Yale, Brown, and the University of Chicago found that more costly Medicare Advantage plans that offer the most services and spend the most on health care can actually add years to your life span.
“Higher premium plans tend to have better mortality effects,” Amanda Starc, associate professor at the Kellogg School of Management at Northwestern and an expert in health care economics, told me in a telephone interview. “Plans that spend more are better for your health as measured by mortality.” (You can read Kellogg’s write-up here and the full study here.)
It’s a striking finding at a time millions of older Americans are deciding whether to buy Medicare Supplement or Advantage plans or to keep the plans they already have. Open enrollment ends Dec. 7.
Read: Are you enrolled in Medicare? It’s time to pick a plan
As we explained last time, (link to previous column here) Supplement plans, also called Medigap plans, fill in the gaps in traditional Medicare Part A and Part B coverage. Advantage plans outsource medical coverage to private insurers who provide care within their own networks.
Supplements allow you to see whichever doctor you want as long as he or she takes Medicare, while Advantage plans function like health maintenance organizations (HMOs) or preferred provider organizations (PPOs). They offer more medical services—such as vision, dental, and hearing aids—but from a limited number of providers.
Medicare Advantage plans are becoming more popular and much cheaper. The Centers for Medicare & Medicaid Services (CMS) estimate the number of Medicare recipients enrolled in Advantage plans will rise about 10% in 2021, to nearly 27 million. That’s a 44% enrollment increase since 2017, CMS reported, and 42% of all Medicare beneficiaries will be in Advantage plans. The number of plans should hit 4,800 next year and people will have more choices—on average, 47 plans per county.
Advantage plans’ growing popularity may be because they’re so attractive to health insurers. (Medicare pays them around $1,000 a month for each person enrolled.) That gives them an incentive to charge very low premiums, and indeed since 2017 the average monthly premium for Medicare Advantage plans has dropped by more than a third, to only $21 a month. (That’s in addition, of course, to Medicare Part B premiums, which all recipients must pay and whose standard premium will be $148.50 in 2021, although people with higher incomes may pay more.)
By contrast, monthly premiums for Medigap plans vary widely depending on the area you live in. Plan F, the most popular Supplement plan because it offers the most benefits, ranges from $120-140 for a 65-year old in Austin, Texas to over $300 in New York City. (High-deductible plans are a lot cheaper.)
The low cost of Advantage plans is clearly their biggest lure (as well as basic coverage of things Medigap plans don’t pay for). But Starc and her co-authors learned that going for the cheapest plans may be penny wise and pound foolish.
The researchers studied people’s choices and outcomes in 75,000 plans within the same counties over some 15 million enrollee years between 2008 and 2011. They found “a positive and highly significant relationship between premiums and observational mortality,” suggesting that higher monthly premiums are associated with greater longevity.
That doesn’t mean it’s a cause and effect relationship. In fact, says Starc, premium prices may not completely capture the true differentiator—the services these plans provide. “I would encourage people to think about plan generosity as being probably the best proxy that we have right now for these health effects,” she told me.
The best measure—medical loss ratio—shows the percentage of premiums an insurer pays out in claims, which reflects how much the plan spends on medical services. But because it may not be readily available, Starc suggests looking at the amount of prescription drug coverage the plan offers. The more generous that is, the better the plan is likely to be.
Also, she told me, “we find that the large insurers appear to supply high quality plans. Humana, United, and Blue Cross Blue Shield plans seem to offer generous coverage and that would be a decent place to start.”
One place not to look: the star ratings Medicare gives to the different plans. Starc and her co-authors found higher star ratings were not associated with better longevity outcomes.
So, to sum up, “higher premium plans have better mortality effects, as do plans with more generous prescription drug coverage and higher medical loss ratios,” Starc said. “You get what you pay for, but make sure you’re getting good value for your money.”
That’s pretty good advice for everything, I’d say.
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November 23, 2020 at 10:01PM
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People who pay more for Medicare Advantage plans live longer - MarketWatch
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