There are 50 million Americans 65 and older in the US,[i] growing at a meteoric 10,000 people per day.[ii] Choosing the right health insurance is one of the most important decisions they will make. Seniors spend over $3,000 a year on average on out-of-pocket health costs.[iii] This is roughly 20% of an average senior’s $16,500 annual social security benefit.[iv] However, out-of-pocket healthcare spending is not evenly distributed. The 30% of seniors who use the most healthcare represent 82% of total out-of-pocket health spending.[v] Thus, healthcare will be a driver of financial security for many seniors, and the single biggest driver for a meaningful sub-segment of the population. Beyond the cost, almost all retirees will need access to high-quality care at some point. In 2015, 22% of over-65 Americans were in “fair or poor” health.[vi] 80% of older adults have a chronic disease. 77% have at least two.[vii]
In general, retiring Americans have two health insurance options: Original Medicare or Medicare Advantage. Today, about two-thirds of seniors are in Original Medicare, and one-third in Medicare Advantage. This gap will likely shrink in the future as Medicare Advantage appears to be particularly attractive to younger seniors (aged 65-75).[viii] The former, Original Medicare, has the insurance managed directly by US Government. This insurance typically requires seniors to pay a monthly premium. In return consumers can see all providers that take Medicare. With Original Medicare, co-pays and deductibles are significant. Some seniors opt to purchase additional coverage to insure out of this cost exposure. Under Medicare Advantage, a private insurance company manages the health benefit on behalf of US Government. These plans typically have lower premiums and co-pays. However, the patient’s choice of providers may be limited, and/or referrals or prior authorizations may be required. Within both of these options, Original Medicare and Medicare Advantage, there are many sub-options. For example, along with Original Medicare, people can purchase drug coverage (Part D) and supplemental insurance, e.g. MediGap. Seniors opting for the privately-run Medicare Advantage have a choice of companies, insurance product types, specific benefits, and more.
Every state has an army of licensed brokers to guide seniors through the insurance selection process. Some are paid by commission and others with fees. The quality and value of their advice vary greatly. There are also several online tools for basic plan comparison. These are web sites that describe each plans’ premiums, co-pays, referral requirements, formularies, and other descriptive information in side-by-side matrices. Unfortunately, despite all these resources, there are at least six insurance-related questions most seniors cannot easily get answered. Given that (1) there is an enormous population of seniors, (2) the health-insurance decision is important to them, and (3) the decision is complex, we need better tools to fill these information gaps. Further, as seniors can switch between the various options every year, the need for this information is ongoing.
Question #1: How much will healthcare cost me next year under each plan?
Personalized out-of-pocket cost projections.
Several tools allow consumers to enter some basic information about their medications and health status to get a rudimentary out-of-pocket cost estimation for various insurance options. Unfortunately, these estimates are typically superficial. They generally under-account for chronic conditions, including the interaction of two or more chronic conditions. The tools usually cannot readily account for already-planned or likely future health events (e.g. pending joint replacement surgery or a screening colonoscopy). There is little use of analytics to quantify future healthcare costs, although the data shows that as seniors age their healthcare needs go up. Finally, there is little if any anticipation of market changes, e.g. a generic alternative to a brand-name drug becoming available next year. While the prediction of future costs is never certain, the industry can certainly do better than they are currently. Internally, plans employ relatively sophisticated predictive models to estimate future health needs. This logic, with some tweaking, can be made transparent to seniors as well. Insurers and employers, via their Private Health Exchange and Benefit Decision Support tools, have made great strides in helping non-seniors optimize their benefit choices. The Medicare market must catch up.
Question #2: Can I get a timely appointment to the doctors I want?
Network depth and access.
Medicare Advantage, also known as private Medicare, differs from Original Medicare in several ways. One of these differentiators is that Medicare Advantage plans have a pre-defined network of providers that patients can see. Some plans have very broad networks, so patients can see almost any provider. Others are quite narrow, only including a handful of providers in a market. A 2017 KFF study found that 22% of sampled plans are “broad,” meaning that more than 70% of physicians in a market are in-network. At the other end of the spectrum, 35% of sampled plans had “narrow” networks. In these plans, less than 30% of physicians in the geographic market were in-network.[ix] On the other hand, some providers, mostly in primary care, no longer accept Original Medicare, and are taking only new patients with a predefined set of Medicare Advantage plans. For seniors, which insurance you choose defines which providers you can see.
Whether a network is truly “narrow” or “broad” is defined by more than just the total number of providers it includes. The number of specific types of doctors a plan has in-network is just as important. A plan that has 90% of all ophthalmologists in-network is nice, but not when you need your arthritis treated. Specialist participation in Medicare Advantage networks varies significantly. For example, KFF found that only 23% of psychiatrists and 49% of orthopedic surgeons were in a Medicare Advantage network, while almost 60% of urologists and ophthalmologists were. Understanding specialist network adequacy is important for insurance shoppers.
Of course, even a detailed comparison of the types of doctors in a network does not fully answer the patient’s true question: “Can I see the doctor I need quickly?” If a plan has a lot of dermatologists in-network, but those doctors are all booked up with other patients, there are access problems. Several markets across the US have significant access problems. According to the firm Merritt Hawkins, the average time to see a cardiologist in Dallas was a mere 12 days, but its was almost 4 times that, 45 days, in Boston.[x]
In sum, allowing consumers to compare average wait times for high-volume specialists, in addition to just having better tools to compare who is in existing networks, would be very useful to insurance shoppers.
Question #3: Will I be able to easily get the care I am prescribed?
Prior authorization and other managed access programs.
Most Medicare Advantage plans, like commercial plans, have instituted prior authorization and other “managed access” programs. These are in place to ostensibly to improve safety and quality while lowering costs. Under these programs, beneficiaries and their doctors must demonstrate that the services being ordered for them by their providers are medically necessary and aligned with the plan’s coverage policy. Services that typically require prior authorization are high-cost medications, advanced imaging (MRI, CT, PET), surgeries, hospitalizations, specialist referrals, and home health care. Some plans have relatively lax requirements, requiring few prior authorizations and have low denial rates. Other plans are much more tightly managed. While each plan must publish their Medical Coverage Policies, it is practically impossible today for an insurance shopper to assess prospectively how many obstacles to prescribed care a given plan will put up. This need not be the case. Data can be analyzed and published for shoppers to compare. Anyone shopping for insurance should want to know how hard it will be to get the medication their rheumatologist has them on, or how many appeal letters it will take to get the surgery recommended by their orthopedist.
Question #4: What else besides the basics do I get?
A clear, understandable explanation of supplemental benefits.
Most Medicare Advantage plans offer some benefits above and beyond what is covered under Original Medicare. These “supplemental benefits” commonly include dental, vision, hearing, and chiropractic, as well as other types of preventative services. For example, one study published in Health Affairs found that 34% of Medicare Advantage beneficiaries get some gym memberships paid for. That makes sense and seems clear enough.[xi] In addition, 14% of beneficiaries get some “tele-monitoring” paid for, 25% get “enhanced disease management,” 40% get access to a “nursing hotline,” and 3% get an “emergency personal response system.” These may be great, and may sway an insurance purchasing decision, assuming the plans could be compared side-by-side and that the customer actually understood what they were.
Question #5: Who like me really likes this plan? Why?
Recommendations and reviews from patients in similar situations.
It’s helpful to have standardized, understandable side-by-side matrices comparing the key attributes of different insurance products. With regard to Medicare products, the industry has a long way to go to fully achieve this. But products and experiences need to be evaluated in their totality as well as by their individual features. How product attributes interact drives their overall performance as much as the attributes themselves do. Furthermore, preferences are subjective. In health insurance, some customers may place a high value on a rich consumer portal. Others may appreciate the clarity of one insurance company’s benefits mailings over another’s. Some may value, explicitly or not, working with an established brand. Others may feel that some plans offer more or less to patients with specific health needs. It would be hard to capture all these on side-by-side comparison matrix. Consumer reviews can however provide this context.
Beyond consumer reviews, companies outside healthcare employ recommendation engines to help shoppers pick the best option for them. Consider how Netflix® suggests the movies I may want to watch next, or which article LinkedIn® thinks I will find interesting. These suggestions are all based on the principle that “people who like what you like also seem to like this.” When choosing to buy something, it is helpful to know what people with preferences similar to the buyer’s have already found useful, and why. For me, Amazon’s Star Rankings and user reviews are the major driver of almost all my purchasing decisions.[xii] Such data-driven preference matching, supported by verified customer reviews and testimonials, would likely help many health-insurance shoppers.
Question #6: Is this plan better for me in the long run?
Long-term outcomes associated with a plan.
The goal of the health insurance selection process is, of course, picking a plan that will minimize the beneficiaries total out-of-pocket costs, keep the her healthy, and provide the overall highest level of customer satisfaction. Historically, health finance decisions, e.g. which insurance one has, have been relatively separate from healthcare consumption decisions, e.g. which doctors to see, drugs to take, etc. For many of the reasons alluded to above—narrow provider networks, complex formularies and associated managed access programs, etc.—this separation no longer exists. Other health plan functions occurring “behind the scenes” also have an effect on a beneficiary’s long-term health, e.g. payer-provider payment models, quality analytics and reporting, or payer care management programs. Some early studies suggest that patients with Medicare Advantage plans have a lower risk-adjusted risk of death[xiii] and higher HEDIS (care quality) measures[xiv] than those with Original Medicare. Within individual plans, we also see significant variations in quality, cost, and patient satisfaction. Finally, many innovative, high-quality, senior-focused providers are entering the market, including The Villages Health®, IORA Health®, and ChenMED®. These new players often align themselves with Medicare Advantage plans. This dynamic further links the the choice of insurance with long term health, not just the ability to preserve accumulated wealth. In total, any insurance shopper should want to know the long-term health outcome and total spending data associated with each benefit option.
Health insurance selection is a big deal. It is also very complicated. The federal government’s effort to standardize the comparison of plans was an important step in the industry’s evolution. Consumers can review a simple side-by-side matrix of various plans’ benefits, along with their algorithmically generated plan Star Ratings. (Star Ratings are CMS’s review of a plan’s performance.) These comparison tools, however, are just a starting point. Allowing health-insurance shoppers to compare options against the six questions above is likely a good next step. Too much money, and the future of millions of American families, depend on the population making the right health choices. With the help of modern AI technologies, Big Data analytics, and a societal commitment to make the system more transparent, giving every senior access to actionable answers to these questions is possible.
[i] US Census Bureau.
[ii] Bernard D. The baby boomer number game. US News & World Report. Marc 23, 2012.
[iii] Commonwealth Fund. Medicare Beneficiaries’ High Out-of-Pocket Costs: Cost Burdens by Income and Health Status. 2017.
[iv] Social Security Administration Fact Sheet at https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf.
[v] DeNardi M et. al. Medical Spending in the Elderly. National Bureau of Economic Research. Working Paper. Jun 2015.
[vi] CDC. Health, United States, 2016.
[vii] National Council on Aging. Healthy Aging Facts.
[viii] Japsen B. UnitedHealth Group Predicts 50% Of Seniors Will Choose Medicare Advantage. Forbes. Jul 20, 2017.
[ix] Jacobsen G et. al. Medicare Advantage: How Robust are Plans’ Physician Networks? KFF. Oct 2017.
[x] Meritt Hawkins. Survey of Physician Wait Times. 2017.
[xi] Pope C. Supplemental Benefits Under Medicare Advantage. Health Affairs Blog. Jan 21, 2016.
[xii] Except when my wife tells me to buy something else.
[xiii] Beverage RA et. al. Mortality Differences Between Traditional Medicare and Medicare Advantage: A Risk-Adjusted Assessment Using Claims Data. Journal of Health Care Organization, Provision, and Financing Volume 54: 1–8, 2017.
[xiv] Casillas G. What Do We Know About Health Care Access and Quality in Medicare Advantage Versus the Traditional Medicare Program? KFF. Nov 6, 2014.