Question

Problem 3. Medicare beneficiaries can choose to enroll in Medicare Advantage plans (the “managed care” option) instead of the traditional Medicare. These privateplans now cover one-third of the total Medicare population.

a. What are the main advantages and disadvantages of these private Medicare plans? Organize your discussions around premiums, access to care (providernetworks) , and financial arrangement (cost-sharing and out-of-pocket cost limit) .

b. Medicare used to pay private plans a capitated rate that equals to 95% of aver- age traditional Medicare costs in each county. Under this arrangement, what is the mostsignificant financial incentive for the profit-maximizing health insurance companies? Please explain.

c. Instead of paying the same rate to all plans in the same geographic area, Medicare recently implemented a “bidding process” where a plan will not necessarily beawarded the contract with the government if the cost is too high. Does this bidding process solve the incentive problem you identified in part b? Please explain.

Answer 1

a) medicare advantage (MA) plans are equivalent to traditional medicare (TM) .

Advantage:Private plans were introduced to offer beneficiaries a choice for their health plan and thought for efficient provision of health care. when beneficiaries are efficient decision-makers take advantage of a “better deal” when it is offered by an MA plan, there is an incentive for plans to compete on price and quality.

the number of plans available to beneficiaries increased and MA plans began to offer benefit packages than TM in the form of reduced out of pocket costs .

Disadvantage:  research on consumer choice of enrollment decisions are often affected by factors unrelated to the cost and quality of the health plan, this can result in making poor choices.

In Medicare Advantage health insurance products are complex, many beneficiaries of the program are weak,

the premium support payments that beneficiaries receive to help them buy health coverage,

it might reflect current levels of Medicare expenditures per beneficiary, and keep the growth in health care costs after sometime .

proposals would shift health care costs to beneficiaries each year through higher premiums and out-of-pocket charges.

enrollees receive lower payments because healthier people cost less to cover , known as risk adjustment.

b) under a premium support system; it could significantly separate healthier and less-healthy enrollees, & makes  less financially viable.

low-income beneficiaries would need substantial financial assistance to enable them to afford insurance and have access to care