Medicare’s annual open enrollment season begins Oct. 15, 2022, giving seniors an important opportunity to do a checkup on their health insurance choices. But they must also brace for a barrage of advertising that turns up this time of year in their mailboxes and on television screens.
Some of that advertising has sparked a surge in consumer complaints about deceptive claims in marketing for Medicare Advantage, the fast-growing, commercially offered managed-care alternative to traditional fee-for-service Medicare and Medicare Part D prescription drug plans. The Centers for Medicare and Medicaid Services, or CMS, which runs Medicare, recently reported that it received 39,617 complaints in 2021—a dramatic 155% increase compared with the number of complaints received in 2020.
CMS also announced new rules aimed at curbing deceptive advertising practices by third-party marketers of Medicare Advantage and Medicare Part D plans, including new disclosure requirements and a reminder to the insurance companies that actually run Advantage plans that they are responsible for any claims made by brokers and call centers.
State insurance regulators also have voiced concerns about Medicare Advantage plan marketing. In a letter to U.S. Senate leadership sent in May, the National Association of Insurance Commissioners asked Congress to revisit federal law that limits state authority to oversee Advantage plans. The organization cited an increase in complaints about “confusing, misleading, and potentially deceptive advertising and marketing of these plans.”
All of this comes as Advantage has grown to account for nearly half of all Medicare enrollment. The Kaiser Family Foundation reports that 48% of eligible Medicare beneficiaries are enrolled in Medicare Advantage plans. That’s 28.4 million people out of 58.6 million Medicare beneficiaries overall.
The heavy marketing of Medicare plans can add to the confusion of an already-challenging process. Choosing between traditional fee-for-service Medicare and Medicare Advantage involves complex trade-offs between up-front premium costs, out-of-pocket limits, and potential restrictions on network providers.
And these choices are not only financial. Wrong-fit coverage can have an impact on your health if it means delayed access to care, or if it prevents you from seeing the best possible healthcare provider for your situation.
Traditional Medicare vs. Medicare Advantage: A Nuanced Choice
The regulatory concerns center on advertising by third-party marketing organizations, such as brokerages and call centers, that earn commissions on the sale of policies. Aggressive marketing pitches often focus on claims that Medicare Advantage is less expensive than traditional Medicare, and that Advantage plans deliver extra benefits, such as dental coverage, gym memberships, and even meals delivered to the home.
All Medicare enrollees pay a monthly premium for Medicare Part B (outpatient services). Those who choose traditional fee-for-service Medicare often buy a stand-alone Medicare Part D plan and a Medigap supplemental policy, which caps out-of-pocket costs. By contrast, many Medicare Advantage plans come without the need for those two add-ons.
But traditional Medicare actually provides the best protection against out-of-pocket costs when coupled with a Medigap supplemental plan. If you are in Medicare Advantage, you carry the risk of additional costs up to your plan’s annual out-of-pocket limit. Those costs averaged $4,972 this year for in-network services, according to the Kaiser Family Foundation.
The huge marketing budgets supporting sales of Medicare Advantage plans create an uneven playing field for consumers choosing between Advantage plans and traditional Medicare during Medicare’s annual enrollment period, which runs from Oct. 15 through Dec. 7.
There simply are no big advertising budgets supporting traditional Medicare, which allows you to visit nearly any healthcare provider in the United States. That feature has become extremely rare in most health insurance plans, and it could be a matter of life and death if you receive a diagnosis of a serious illness and want to seek out care from a top-rated specialist or facility that might not be in a Medicare Advantage network.
“There’s no advertising for traditional Medicare, but there’s quite a bit of marketing for Medicare Advantage plans, although the ads don’t generally get into the nuances of the benefits and how they actually work,” says Gretchen Jacobson, vice president, Medicare, at The Commonwealth Fund.
The Commonwealth Fund has studied marketing of Medicare Advantage plans by third-party brokerages. Jacobson notes that brokers can play an important role helping enrollees sort through complex plan choices. But it’s important to understand that brokers earn a living through commissions, so they have a built-in bias to sell their own product lines. Enrollees who use a broker therefore may not be presented with plans based on thorough analysis of all the possible coverage choices available to them.
For example, a Commonwealth review of online broker plan selection tools found that, on average, each tool included just 43% of available Medicare Advantage plans and 65% of Medicare Part D plans.
Commission structures also matter, and The Commonwealth Fund has found potential conflicts between financial interests of brokers and beneficiary interests. CMS sets maximum broker commissions for Medicare Advantage, Medicare Part D, and Medigap. But insurer payments can vary, and the highest commissions are paid on first-time enrollment in Advantage plans. And plan brokers can earn additional bonus payments for meeting enrollment targets. “The bonus payments are not regulated by CMS, nor are they reported,” says Jacobson.
“Ideally, the financial incentives of brokers and the interests of beneficiaries would be perfectly aligned,” says Jacobson. “But when they’re not, the beneficiary should be made aware of it.”
A Medicare Advantage research and advocacy group said it supports the new CMS rules governing third-party marketing organizations.
“We welcome these policies because we know that Medicare Advantage has a powerful, fact-based story to tell of how it is lowering costs, enhancing benefits, and improving health outcomes for more than 29 million overwhelmingly satisfied seniors and individuals with disabilities,” says Mary Beth Donahue, president and CEO of the Better Medicare Alliance.
But commenting on the National Association of Insurance Commissioners request to Congress, the organization said it supports keeping regulation of Medicare Advantage at the federal level.
Why Choosing the Correct Medicare Plan at Initial Enrollment Matters
The choice between traditional Medicare and Medicare Advantage at the point of initial enrollment is critical—and not only for cost reasons.
The marketing pitches for Medicare Advantage plans may sound attractive to you as a healthy 65-year-old, but it’s important to also focus on the healthcare needs that might arise as you age. “When you’re deciding on whether to enroll in Medicare Advantage or traditional Medicare, all too often, you’re not just deciding how your care will be paid for—it can have very real and very impactful consequences for you in terms of how you receive care,” said Terrence Cunningham, the American Hospital Association’s director of administrative simplification policy.
Theoretically, you can switch between traditional Medicare and Medicare Advantage during the annual fall enrollment period. But from a practical standpoint, a choice to enroll in Advantage when you first sign up for Medicare may be irreversible because of the rules governing Medigap supplemental insurance and pre-existing conditions.
If you enroll in traditional Medicare, you’re going to want supplemental Medigap coverage—and the best time to buy a policy is when you first sign up for Medicare Part B. That’s because Medicare forbids Medigap plans from rejecting you, or charging a higher premium, because of a pre-existing condition when you first enroll. This is referred to as “guaranteed issue,” and the opportunity is available to you during your six-month Medigap Open Enrollment Period, which starts on the first day of the month in which you’re 65 or older and enrolled in Medicare Part B.
The traditional program allows you to see any healthcare provider that accepts Medicare—and most providers do. Medicare Advantage plans, meanwhile, are structured to incentivize you to see in-network providers.
Moreover, regulators who oversee Medicare Advantage have voiced concern about denials of care by plans. A report issued earlier this year by the Office of the Inspector General at the U.S. Department of Health and Human Services noted that Medicare audits of Advantage plans “have highlighted widespread and persistent problems related to inappropriate denials of services and payment.” The report found that denials of requests “that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care and can burden providers.”
Those concerns have been echoed by the American Hospital Association, which responded in a letter to a recent request by Medicare for public comment on the Medicare Advantage program. The letter describes “several serious concerns about the negative effects of Medicare Advantage Organization practices and policies, which impede patient access to healthcare services, create inequities in coverage between Medicare beneficiaries enrolled in Medicare Advantage versus those enrolled in traditional Medicare, and in some cases, even directly harm Medicare beneficiaries through unnecessary delays in care or outright denial of covered services.”
The Kaiser Family Foundation recently published a review of more than 60 studies that compare Medicare Advantage and traditional Medicare based on the experiences of beneficiaries, affordability, utilization of healthcare, and quality. The review found few definitive, evidence-based differences between the two. Some key findings:
- Both Medicare Advantage and traditional Medicare beneficiaries reported similar rates of satisfaction with their care and overall measures of care coordination.
- Medicare Advantage outperformed traditional Medicare on some measures, such as use of preventive services, having a stable network of healthcare providers, and lower hospital readmission rates.
- Traditional Medicare outperformed Medicare Advantage on measures such as receiving care in the highest-rated hospitals for cancer care or in the highest-quality skilled nursing facilities and home health agencies.
- A smaller share of traditional Medicare beneficiaries experienced a cost-related problem. That was due to the pairing of traditional Medicare with supplemental coverage, such as Medigap or a retiree supplemental benefit.
Resources for Choosing a Medicare Plan
Open enrollment is your annual opportunity to switch between original Medicare and Medicare Advantage or to make changes to your current Medicare Part D or Medicare Advantage plan coverage to make sure you’re getting the best deal financially—and the best match of healthcare providers and drug coverage.
Start your shopping process by reviewing the Annual Notice of Change letter that comes each autumn from your Medicare prescription drug or Advantage plan provider. The annual notice details any changes in rules for cost-sharing, coverage of specific medications in your current plan, and whether a specific drug will be covered.
Even if you like your current coverage, it can pay to take a careful look at how your Medicare plan compares with others during open enrollment. The design of your prescription drug plan coverage can change annually, and Advantage plans can make changes to their networks of healthcare providers at any time.
If you’re enrolled only in traditional Medicare with a Medigap supplemental plan, there’s no need to re-evaluate your Medigap coverage. But if you have traditional Medicare and a Medicare Part D drug plan, it makes sense to review your drug plan annually to see what drugs will be covered and at what cost, and how they will be delivered.
The State Health Insurance Assistance Program network provides free one-on-one assistance in every state. These are federally funded programs staffed by trained volunteers; use this link to find yours.
The Medicare Rights Center offers a free consumer helpline at 800-333-4114.
The Medicare Plan Finder is the official government website that posts stand-alone prescription drug and Medicare Advantage plan offerings.
When it comes time to enroll, call Medicare to sign up at 800-MEDICARE (800-633-4227) and to ensure that your enrollment has been processed.
Mark Miller is a freelance writer. The opinions expressed here are the author’s. Morningstar values diversity of thought and publishes a broad range of viewpoints.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.