By Richard Salit, The Providence Journal, R.I.

Nov. 27–Despite the documents he has amassed in his Barrington home and the calls he has made to insurers, state agencies and congressmen, Miguel Milich says he still can’t understand exactly what’s going on with his Medicare coverage.

One thing’s for sure: he and his wife will have to pay $1,750 more next year for their Advantage plans, which are private health insurance plans subsidized by Medicare.

“All of a sudden I’m looking at a 60-percent increase,” says Milich, factoring in what it will cost to buy the dental coverage being dropped from his plan. He plops atop a table a pile of papers he has collected in researching what happened and says, “Is this disgusting what I have to go through? And I’m still not getting anywhere.”

Plenty of others are seeking answers, too.

“We’re getting lots of calls because they’ve gotten rate increases and they don’t know who to talk to,” says state Health Insurance Commissioner Christopher Koller, whose office has no authority over the federally regulated plans.

Since retiring from a career as a plastics salesman, Milich, 72, joined the many seniors across the country who flocked to Advantage programs. The private plans provide an alternative to what is called Original Medicare and have features seniors grew accustomed to when they had insurance from their employers, such as dental care and eye exams.

Milich pays $183 a month for a top-shelf Advantage plan provided by Blue Cross — the company has four plans to pick from — which includes prescription drug coverage and the flexibility to see most any physician he chooses. His wife is enrolled separately, as required, and pays the same amount. But the couple recently learned that the cost of their BlueChip for Medicare Preferred plan will go up 40 percent next year, to $256 monthly per person.

When Americans turn 65, they have several options for health insurance. There’s Original Medicare, which helps pay for hospital visits and doctor’s appointments. The $96.40 cost is deducted from seniors’ monthly Social Security checks.

Prescription drug plans, which are subsidized and regulated by Medicare, can be purchased separately through private insurers. Rhode Island’s elderly have up to 25 different plans to choose from.

These plans can be supplemented with Medigap plans, which help pay for out-of-pocket fees not covered by Medicare. There are about a dozen Medigap options, all from private insurers. Medigap coverage, which is not subsidized by Medicare, is regulated by the state. Last Monday, Rhode Island’s health insurance commissioner approved Medigap rate hikes that average about 3 percent to 4 percent for next year.

Medicare Advantage plans, such as the one the Miliches have, are a completely separate option. They offer seniors one-stop shopping for Medicare benefits and more. The convenience and value has proven attractive to many seniors, many of whom have been paying nothing beyond, or only a little more, than the $96.40 deducted from their Social Security checks to participate in basic Advantage plans.

Enrollment in Advantage plans has been growing steadily, 16 percent alone in 2008, according to the Medicare Payment Advisory Commission, which advises Congress. About 22 percent of Medicare beneficiaries across the country belong to an Advantage plan. In Rhode Island, they’re even more popular. Of the 173,831 Medicare recipients here, about 57,960, or 33 percent, are Advantage subscribers, according to the U.S. Center for Medicare and Medicaid Services.

Every fall, Medicare participants receive packets from the federal government notifying them of annual enrollment periods. It lists available plans and their prices. The rate hikes for the Advantage plans have seniors lighting up the phones at the state Department of Elderly Affairs.

“They are in a certain position where they feel they can no longer handle the premiums,” says Larry Grimaldi, chief of program development. His agency receives federal funding to offer counseling to Medicare beneficiaries and Grimaldi encourages seniors to attend its workshops and to call 462-3000 with questions.

Driving the price hikes is a 4.46 percent cut in federal payments that insurers will receive next year for Advantage programs. The largest part of the cut, 3.41 percent, resulted from a 2006 law that sought to curb insurers from exaggerating patients’ illnesses to receive larger payments. The Obama administration put the law into effect this year.

“Clearly the federal reimbursement for Medicare Advantage plans is dramatically less in 2010 than 2009,” says Raymond Brown, assistant vice president of government programs for Blue Cross & Blue Shield of Rhode Island, which offers four of the six Advantage plans in the state. The other two are offered by UnitedHealthCare.

Brown says that Blue Cross was facing a 10-percent deficit in 2010 in its Advantage programs because of the cut in federal subsidies and because of a projected medical inflation rate of about 6 percent. That amounts to about $80 monthly per subscriber, he says.

“We really looked at ways we could try to reduce that number down as much as possible. We ended up setting up a premium increase, which really we were forced to do, of about $40,” says Brown.

Brown says that dental coverage was eliminated from some plans to cut costs. One plus for subscribers, he says, is a change that allows a broader range of expenses to be applied toward deductibles, potentially reducing out-of-pocket costs.

None of this was explained when Advantage subscribers received their Medicare packets and many have been frustrated getting answers.

“I’ve been trying to get through to Blue Cross. All you keep getting is recordings and recordings,” says Frank Peltier, of Cumberland.

The increase in the Advantage plan he and his wife get–from $94 to $146 monthly for each of them — “is ruining our retirement fund,” says Peltier, 73, a retired van driver and lace weaver who, with his wife, requires about a dozen drug prescriptions. “I’m not happy at all. I think it’s outrageous.”

While the 2006 law was intended to reduce wasteful Medicare spending, Washington lawmakers are now eyeing even further cuts in Advantage subsidies to help pay for national health-care reform, namely extending coverage to the uninsured.

The Medicare Payment Advisory Commission, in a March 2009 report, found that Medicare pays 14 percent more for each Advantage member than for traditional Medicare subscribers. Reducing federal payments to Advantage plan providers to what is spent on traditional Medicare recipients would save $117 billion in 10 years, according to the Congressional Budget Office.

Len Nichols, director of health policy at the New America Foundation, a nonprofit, nonpartisan public-policy organization, says that Advantage programs began when Ronald Reagan sought to reduce Medicare expenses by inviting the private sector to participate in managing public health care.

Over the years, says Nichols, the formula for how insurers are paid has been adjusted by whichever party was in control in Washington, with Democrats seeking to curb the payments and strengthen the government’s central role in Medicare and Republicans increasing the payments to encourage privatization in Medicare.

Referring to legislation now in the House and Senate, Nichols says, “both proposals to reform health care take quite a bit of money out of the overpayment to Medicare Advantage plans.” That money, he said, would be used to reduce the number of uninsured Americans and to close the so-called “doughnut hole,” a gap in coverage seniors confront after exhausting certain prescription drug benefits but before additional coverage kicks in.

His message to Advantage subscribers is “your plan has been overpaid on average by 14 percent. As far as we can tell the benefits you’re getting is about half of that, so some of what you get is better benefits and some of what [insurers] get is more profit. When you take away the overpayment over time, they are going to take away some of what they give you to protect their profit. …Why would we want them in business if the only way they do it is by getting an overpayment?”

Addressing the problem, he said, is “really is about preserving Medicare for you.”

Meanwhile, Advantage subscribers have until Dec. 31 to decide what to do.

“I can change into something else if I want,” says Peltier, “not that any of the others are going to be any better.”

Milich has been researching Medigap plans, but is confused about how they differ and wary of restrictions on preexisting health conditions.

“I hit the wall,” he says. “I don’t know where I’m going.”

For more information, go to www.medicare.gov/publications and click on “Medicare and You 2010.”

BACKGROUND

Health insurance choices for seniors

–Medicare Part A: Helps cover hospital and some nursing care. Free for most.

–Medicare Part B: Helps cover doctors’ visits and preventive services. Typical charge is $96.40 a month, deducted from Social Security checks.

–Medicare Part C: Medicare Advantage plans, which include Part A and Part B and may offer extra coverage for vision, hearing, dental and prescription drugs. No restrictions on preexisting conditions. In addition to $96.40 monthly Social Security deduction, subscribers may have to pay a premium depending on the plan they select.

–Medicare Part D: Prescription drug coverage available through private insurers.

–Medigap: Plans that supplement Medicare benefits and are sold by private insurers at rates regulated by states. Helps pay for copayments and deductibles. Not needed if you have Medicare Advantage.

—–

To see more of the The Providence Journal, or to subscribe to the newspaper, go to http://www.projo.com.

Copyright (c) 2009, The Providence Journal, R.I.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

UNH,

A service of YellowBrix, Inc.