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Healthcare podcast covering hospital systems, medical education, physician employment, healthcare policy, and the future of academic medicine. Exploring corporate healthcare, nonprofit hospital governance, medical school funding, and patient care quality. Real cases, expert analysis, systemic change.
Welcome back to the Deep Dive.
Today, we're tackling something that is, well, it's really reshaping American healthcare, especially for anyone thinking about retirement.
We're talking about Medicare.
Specifically, Medicare advantage.
It's that, you know, private alternative to the traditional government program and it is growing incredibly fast.
And it's a topic that's just full of paradoxes, really.
On one hand, you have these promises of amazing coverage, low premiums, all these extra benefits.
Things like dental, vision, gym membership.
Exactly.
But on the other hand, the financial engine under the hood, it's created these really powerful incentives that can and often do prioritize profit over patient care , especially when you get get seriously ill.
Absolutely.
And to really cut through all the TV commercials and the marketing noise, our source material use this one analogy that I think just perfectly captures it.
It's the VIP grocery shopping card.
It's such a great metaphor.
Because it highlights the trade-off so clearly.
So imagine you've been using original Medicare for years.
It's that classic, reliable card.
The one that works pretty much everywhere.
Right.
And almost any doctor or hospital coasted to coast .
Then this very charismatic salesperson comes along and offers you this new VIP card that's Medicare advantage.
And they promise you everything.
The same grade access, they say.
But with all these fantastic perks thrown in.
Free gym membership, maybe that dental coverage you wanted, and crucially , a much lower, sometimes even a monthly premium for the planet's itself.
It just seems like pure upside.
There's no catch.
But that's where you have to read the fine print, because that VIP card, it comes with some immediate, very real restrictions.
Okay.
Suddenly you can only shop in specific aisles.
Your network of doctors, of hospitals is now limited.
And before you can put certain essential, expensive items in your cart, like a specialized scan or maybe a surgery.
You need to get permission first, prior authorization from the stair manager.
And here's the kicker, that store manager profits if you don't buy the item.
And that is the shell game we are really digging into today .
You think you're getting a better product with all these perks, but what you've actually done is trade away universal choice and simplicity for restrictions.
And frankly, a mountain of administrative hurdles.
So our mission today is it's a bit complex, but it's essential.
We're going to define exactly what Medicare advantage is.
We're going to trade the flow of money that drives this whole industry.
And explain that key difference between saving some money when you're healthy versus being really restricted when you get sick.
And finally, we'll look at the political forces that, you know, keep this whole system locked in place .
We're watching a fundamental shift from a direct government health insurance program to a private, fixed fee management model.
And that one shift dictates every single outcome we're about to discuss.
All right.
So to really get why Medicare advantage works the way it does, we have to start with the money.
I mean, if you don't follow the cash, none of the incentives make any sense.
Yeah, that's right .
And our sources break the whole system down into four, what's called them, financial characters.
Okay, who's player number one?
Well, player number one is you, the Medicare beneficiary.
The customer.
You're the customer.
You You've paid into this system your whole life.
You're the person whose health and financial security.
This whole thing is supposed to be for.
Okay, that's character one, who's two?
Character two is the federal government .
Spec specifically, the centers for Medicare and Medicaid Services or CMS.
They're the bank.
They're the bank.
They collected your taxes, they hold the purse strings, and they're supposed to set the rules.
Though, as we'll see, often with a lot of influence from the industry.
All right.
And character three..
These are the insurance companies, the middlemen, the administratorsors.
The big names we all know, United Healthcare, Humana.
Etna, CVS Health, all of them.
They step in and, you know, they bid to take over the managing of your Medicare benefits from the government.
And that leaves care for the people actually doing the work.
The healthcare providers.
The doctors, the hospitals, the surgical teams, the people who deliver the care and, you know, need to get paid for what they do.
So now let's trace the money.
Let's start with a traditional path, the one people are probably most familiar with.
Path one.
Original Medicare.
We'll call it the direct route.
It's the classic system, and it's actually pretty straightforward.
Here, the government is just acting as your insurance company, right?
Directly.
The mechanics are simple, you need care, you go to pretty much any doctor or hospital in the country that takes Medicare.
Which is most of them.
Something like 90%.
An overwhelming majority.
The provider gives you the care, they send the bill straight to CMS.
CMS looks at it and pays the provider directly. Usually, you know, within two weeks.
And it's at a publicly set, standardized rate.
And for you, the patient, what's your financial part in this?
It's very clear .
The government covers 80% of the approved cost.
You owe the other 20%.
That's the coins insurance.
But, and this is a really important, but that 20% is almost always covered by something else.
Yes, by supplemental insurance, which most people know is Medag.
If you have original Medicare plus a good Medagap plan, your out-of-pocket costs for medical care, even something catastrophic, are often zero.
All you pay are your fixed monthly premiums.
And the payment model itself is called fee for service.
Right.
The doctor gets a fixed amount for what they do.
It's all transparent.
It's $450 for a colonoscopy, $95 for an office visit, maybe $8,000 for pneumonia admission.
The prices are the same everywhere.
Okay, so that's the direct route.
Now let's pivot to the other path.
Path T2O Medicare Advantage, the middleman route.
This is where the whole financial engine just completely changes, the risk and the power, it all shifts.
So when you pick a private MA plan, the government is no longer your insurer.
That's right.
They're roll stops.
Instead of paying for each service you use, the government pays the insurance company a fixed monthly allowance to manage all of your care .
This is called a capitation pay.ment.
And how much are we talking about here?
Well, our sources show this monthly payment.
It can range from, say, $1,200 to $1,400 a month, sometimes more.
Wow.
So that's $1,450, almost $17,000 a year.
Per person, annually.
That's money flowing from the Treasury to the insurer for each member they enroll.
And when you need care in this system, you have to stay within their approved network.
You do.
And the insurance company decides if the care gets approved through prior authorization .
Then they pay the provider, usually at a rate they've negotiated that's actually lower than what original Medicare would have paid.
Okay, this feels like the core of the whole deep dive right here.
It is.
This is the critical incentive shift.
In original Medicare, the government pays for the care you use.
The incentive is to provide necessary care.
But in MA.
In MA, the government pays that fixed amount no matter what .
And the insurer keeps the difference between what the government pays them and what they actually spend on your care.
So that margin, the money they don't spend on doctor visits or hospital stays, that's their profit.
Pure corporate profit.
Let's use the numbers from the research here because this really shows why this model is so appealing, especially to a healthy person, even though it shifts all the risk onto you if you get sick.
Okay, let's look at the original Medicare Plus Metagap example.
Your annual cost is your part B B premium, around $2,200 plus your meta premium, maybe another $2,000 to $2,500.
So let's call it around $4,500 a year all in.
Right.
Now, if you get into a terrible accident, you have $100,000 hospital bill.
Your out-o-pocket cost is still zero .
Metaap covers that 20%.
The financial protection is total, but you pay more upront.
Now, the Medicare Advantage pitch, the planet itself often has a zero premium, so your only cost is that mandatory part B premium, $2,200 a year.
Instantly you're saving over $2,000 compared to the Metaap route.
It's a huge selling point.
But what's happening behind the scenes?
The government is still paying that insurer that $14,000 to $16,000 capitation rate for you .
So if you have that $100,000 medical crisis, the insurer actually loses money on you that year.
They get $16,000, but pay out $100,000, they're deep in the red.
But they're not building their business models on the sickest members.
Not at all.
It's built on the huge number of healthy members .
For every one catastrophic case where they lose money, they might have 10 healthy members who only use, say, $8,000 of routine care.
And for each of those 10 people, the insurer gets $16,800 from the government.
So they receive $168,000 , but only sp $80,000.
The profit on just those 10 healthy people is $88,000.
Now, scale that up to millions of members.
And you see why these are multi billion dollar companies.
The core motivation is crystal clear .
If you get paid a fixed fee to manage someone's health, the path to profit is to spend as little as possible on their care.
It's just an unavoidable economic reality.
It's like that car repair shop analogy from the sources.
If the government pays you a flat fee every year to fix all of my car problems.
You're not incentivized to do comprrehensive timely repairs .
You're incentivized to sign up people with brand new cars that never break down.
And for the people with older cars, you're incentivized to delay or deny the big, expensive engine work for as long as you possibly can.
And that's exactly the tension at the heart of this system.
So this model, capitation , it feels like it was designed for this outcome, but ironically, it was created to solveve a really big problem in original Medicare, right?
It was.
It was a direct response to the 1970s cost crisis.
That old fee for service model had this built in flaw, as you mentioned.
It actually incentivized doctors to do more.
More testss, more procedures, longer hospital stays, every single service generated more revenue.
It was like a blank check , and it led to this explosion in overutilization and costs.
The numbers were pretty scary, I recall.
They were terrifying.
Medicare spending went up fivefold in just 10 years.
It hit $35 billion by 1980.
The government realized there were being basically paying contractors by the hour with no oversight , which is a recipe for inefficiency.
So economists came up with this big idea, capitation.
Pay a fixed fee per patient.
Exactly.
The theory was this would force providers and insurers to focus on efficiency, on preventative care, on keeping you healthy, because if they kept you healthy and out of the hospital, they got to keep the money.
Sounds great in theory, eliminate waste, save money.
It's a sound economic theory.
Uh huh.
But the early experiments with these health maintenance organizations, HMOs, back in the 80s and 90s, they immediately ran into into a huge problem.
The cherry picking problem.
The cherry picking problem.
They went out and enrolled the healthiest seniors they could find, the ones least likely to cost them any money.
And the government was paying them based on the average cost of a Medicare patient, right?
Right.
They paid the HMO 95% of the average cost , but the HMOs were only spending around 70% on their super healthy members.
Which had a disastrous effect on the tri traditional system.
It was a death spiral.
All the expensive sick beneficiaries got left behind in traditional Medicare.
So the average cost of traditional Medicare shot through the roof because it was only ensuring the sickest people.
And that, in turn, inflated the payment to the HMOs because their payment was based on that now higher average cost.
Which made their profit margins even bigger.
It was a big vicious cycle.
So by 2003, with the Medicare Modernization Act, the government basically decided to just lean into it.
They gave up trying to limit the profit and just sweeten the deal, formalizing the system we now call Medicare advantage.
And they made some huge changes to make sure it would grow.
Three massive changes .
First, they just jacked up the payments to insurers, sometimes to over 115% of what it costs in traditional Medicare.
So they were literally paying more for a private plan than for the public one.
In many cases, yes.
Second, they integrated the very popular prescription drug benefit part D into the MA plans.
That was a huge draw.
And third , the marketing blitz.
The unleashed the marketing.
This is when you start seeing all the celebrity endorsemented ads promising the premiums, the dental, the vision, the gym memberships.
The goal was just volume, get as many healthy seniors in the door as possible.
But the most important piece they put in place was this thing called the riskest adjustment payment system.
This was the mechanism that was supposed to stop the cherry picking .
The idea was to make sicker patients more financially attractive to the insurance plans.
How did that work, in theory?
The logic was pretty simple.
If an insurer enrolls a healthy person, they get the baseline payment, maybe $900 a month , but if they enroll someone with really complex conditions, kidney failure, cancer, heart disease, the risk score is high, and the pay it might jump to 2,500 a month.
It was supposed to level the playing field.
It was.
But what happened was this, this massive perversion of the system's intent , and it's now the subject of federal investigations and billions in fraud lawsuits.
What did the insurers figure out?
They realized they didn't need to manage the sickness better.
They just needed to document it better.
The profit wasn't in better care, it was in better coding.
This is the risk adjustment game.
Exactly.
You make immense profits by making the patient look sickerer on paper than they actually are . Maximizing these things called hierarchical condition categories or HCC codes, which CMS uses to calculate the payment.
The source material used that babysitting analysis, which was perfect.
It really is.
If you get paid more to babysit a kid who's documented with a bunch of behavioral disorders, you have a very strong incentive to label every little tantrum as a symptom of some chronic condition.
So what did the MA plans do in the real world?
They deployed these really sophisticated strategies.
They'd send nurses or coders out for home health assessments , and their only job was to document every single minor or past medical issue they could find.
So if a patient mentions, they get heartburn sometimes.
That gets documented as chronic GERD.
If they had slightly elevated blood sugar five years ago , it's coated as chronic diabetes, even if it's perfectly controlled now with diet.
And these little coding changes have huge financial consequences.
Massive.
Documenting a patient as morbidly obese might be worth an extra $1,500 a year to the insurer.
Documenting a history of mild depression that doesn't even require treatment might be worth an another $500.
I have to stop you there.
So you're telling me these diagnoses, which might not even change the patient's treatment plan at all, are generating thousands of extra dollars in government payments every year.
That's precisely right.
Federal audits have found this over and over again.
They've found plans coding patients with a history of cancer even decades after they were fully in remission, just because that HCC code brings in a much higher capitation payment.
The scale of this is hard to wrap your head around.
You mentioned a figure earlier, $25 billion a year in overbilling.
How did investigators even arrive at that number?
It is a staggering number, and it comes from reports from the office of the Inspector General, the OIG, and other government accountability offices .
What they did was they compared the data.
MA patients versus traditional Medicare patients.
Exactly.
And they found that the MA patients were being coded as substantially sicker than similar patients in traditional Medicare, even though they had similar, you know, health outcomes and mortality rates.
So on paper, the MA group looked much sicker, which justified these massive government payments .
But in reality, the difference was just in the paperwork.
It was in the documentation, not the actual medical need.
They looked at the data.
The money was flowing based on the coded severity.
But when they looked at things like hospitalization rates or what medications people were actually using, the MA patients were often comparable to or even healthier than the average person in traditional Medicare.
So that's the $25 billion.
The OIG estimates the government overpaid MA plans by about $25 billion a year, because the payments were based on these inflated sickness levels.
That is, taxpayer money flowing directly into corporate profit , all while masking the real efficiencies or lack thereof, of the whole model.
It just completely turns the original idea on its head.
A system meant to reward efficiency and prevention became a machine for maximizing revenue through paperwork.
And now that we understand that $25 billion incentive to spend less , we have to talk about what that actually looks like for you, the patient on the ground.
Right.
When you actually get sick, that profit motive turns into $3 things.
Restricted choice, debilitating bureaucracy, and just high rates of denial.
Let's start with the first one, the network, your new shopping restrictions.
This is the first thing you really notice when you switch from original meticare to MA.
Original Medicare, as we said, is basically a national insurance card.
It works almost everywhere.
But Medicare Advantage is an HMO, or a PPO.
It limits you to a very specific network of doctors and hospitals in your area.
And the real world consequence of that can be immediate and frankly devastating for some people.
They can?
If you have a doctor you've trusted for 20 years, let's call her Dr. Smith , and your new MA plan doesn't have a contract with her.
You lose her.
Your choice is either find a new doctor in the network or pay these huge outo-pocket costs to see her.
Right.
Like 40 to 50% of the bill.
If your plan even allows you to go at a network at all, many don't.
And this is especially critical if you need specialized care.
Absolutely.
If you live near a world-class cancer center or at top cardiac hospital , you have to check if your specific MA plan has a contract with that facility.
If you get a serious diagnosis, your access to the best care available might be completely blocked by an administrative contract.
Words with traditional Medicare, that whole issue just goes away.
It's a non-issue.
If you need to fly across the country to the mayo clinic because they have the best specialist for your rare condition , and they accept Medicare, which they do, you're covered.
End of story.
And this leads right into the main tool they use to control costs.
Prior authorization, asking for permission.
This is where that profit generating machine really, truly affects the patient's care.
In original Medicare, the doctor orders a treatment based on medical need, and you get it.
In Medicare advantage, that doctor's order is just a recommendation .
It has to be reviewed, justified, and ultimately approved by the insurance company's internal staff first.
Let's use that anecdotal contrast from the sources.
It really brings it home.
Let's start with Sarah's story on original Medicare.
Okay, Sarah has severe, sudden abdominal pain .
Her doctor orders some tests and decides she she needs surgery.
Because her doctor is the authority here, she gets an ultrasound that same day, and they start scheduling the surgery immediately.
The whole process, from her feeling sick to getting treated, is measured in days.
Now, let's look at Tom's story on Medicare advantage.
Same symptoms, same doctor's recommendation .
He needs surgery.
But now, the doctor's office has to spend hours filling out prior authorizations paperwork.
We're talking pages of documentation, clinical notes, records of what treatments failed before.
And the insurance company, whose incentive is to spend less, often pushes back.
They might issue an initial denial or just ask for more information.
They'll ask, did you try this cheaper pill first ?
Or can you prove an MRI is necessary instead of a less expensive x-ray?
And the doctor's staff spends days, sometimes weeks, just playing phone tag and fighting with web portals.
And all the while, Tom is just waiting in pain.
A procedure that should have taken a few days is now stretching into weeks, purely because of this administrative battle.
And the scale of this is shocking .
MA plans require prior authorization at a rate that's 10 times higher than original Medicare. 10 times.
And think about the burden on the people trying to give the care.
Doctors report spending an average of 14 hours a week, that's almost two full work days for a staff member, just dealing with prior author quests.
That is a staggering amount of time and money that's not being spent on treating patients.
It's being spent arguing about care .
And that leads directly to the denial game.
The financial incentive to say no is so powerful that the denial rates are just dramatically higher.
Traditional Medicare denies less than 1% of claims.
And Medicare advantage.
It's somewhere between 5 and 10%.
And what's more, federal audits have shown that MA plans routinely deny claims for services that original Medicare would have covered without question .
It proves these denials are about cost, not about. Standards.
So what are the most common ways that an MA plan says no?
What should you be looking out for?
The not medically necessary denial is a classic.
Your oncologist, the expert treatmenting you, recommends a peat scan to stage your cancer .
But an insurance company doctor, who's never met you and might be a rheumatologist, reviews your file and denies it.
So your life-aving treatment is delayed while you start the appeals process.
Exactly.
Another one that's just incredibly cruel is the wrong setting . Denial.
So, you have a bad fall, you go to the hospital, you're admitted.
Weeks later, you're home and recovered, and you get a notice.
And what does it say?
The insurance company has retroactively reviewed your case and decided you shouldn't have been admitted.
You should have just been placed under observation status.
And because the billing codes for those two things are totally different.
The insurer refuses to pay the full hospital bill .
And suddenly you, the patient, get a surprise bill for thousands of dollars, even though you had no control whatsoever over how the hospital coded your stay.
So when you're facing one of these denials, your only option is the appeals process, which the sourcece is called the gauntlet.
And that's a good name for it.
In theory, it's your protection, but in practice, it is designed to be incredibly difficult, especially if you're elderly and sick.
It's a multi-level system, right?
It is.
Level one is plan reconsideration .
You appeal directly back to the same insurance company that just profited by denying you.
That takes up to 30 days and your success rate is predictably very low.
Around 20%.
That is just a brutal reality.
You're sick, you're trying to navigate this, and your first step is to ask the company that said no to please reconsider.
If you can push past that, you get to level two.
Independent review.
This is where an outside third party looks at the decision.
And here's the crucial data point.
Your success rate here jumps to about 60%.
60%.
So that means that in six out of 10 cases that make it this far, the initial denial by the MA plan was just wrong.
Medically unjustifiable.
And if you go even further to level three within an administrative law judge, the successful rate goes up to 70% or more.
But you could be waiting 90 days, 120 days .
You could be fighting for half a year to get care of your doctor ordered months ago.
The sad reality is that most people just give up..
They do.
They're sick, they're tired, they pay the bill themselves, or they just go without the care because the bureaucratic exhaustion is just too much.
And finally, let's look at this from the hospital's perspective. , the providers.
The administrative costs are getting so high that many of them are just walking away from these contracts.
Right.
Let's take a hypothetical regional Medical Center.
If they get, say, $10,000 for a knee replacement under regional Medicare, they might only get $9,000 from an MA plan after a lot of negotiation. $1,000 doesn't sound like a lot, but when 50% of your patients are on on MA plans?
It adds up fast.
We're talking losses of $1.4,000 to $2.7 million a year compared to what they would have made in the traditional system .
And that's before they even pay for the stock to fight all these prior authorizations.
Exactly.
They have to hire a whole army of people just for this.
One source cited a hospital that had to hire 15 full time employees whose only job was to handle MA authorizations and appeals.
That's another million dollars in administrative costs they just don't have with traditional Medicare.
So they're getting paid less, and they have to spend more to get that smaller payment.
And this has a really big implication for you if you live in a smaller town or a rural area.
A huge implication.
If your small community hospital is running on a thin margin and they calculate that these MA contracts are costing them $2 million a year, they might just drop them.
And it's important to clarify, they aren't dropping Medicare.
No, they still accept original Medicare.
They are just no longer accepting your specific private MA plan, which means your access to local care can suddenly vanish purely because of the insurance plan you chose.
Okay, we've laid out the profit motive, the administrative hurdles.
Now we have to make this personal.
I think this is the most important part of this deep dive.
Understanding how this choice directly impacts your wallet and your health based on your own situation.
This is where the premium promise meets reality.
We have to look at the three scenarios from our sources, the healthy senior, the moderately ill, and the seriously ill, because the best choice for you really depends on your potential health journey.
Let's start with scenario one, Margaret, the healthy senior .
She's 68, she's active, no regular meds, just a couple of checkups a year.
Under traditional Medicare Plus Medigation,, Margaret pays her total of about $4,500 a year in premiums.
Her out-of-pocket costs for care are zero.
She has total freedom to see any doctor.
Now, under a typical zero premium Medicare advantage plan , she only pays her part B premium, $2,220 a year.
Right.
Her preventative visits are covered.
She gets her free dental, her gym membership, The restrictions don't affect her, because she never needs the kind of expensive, specialized care that triggers a prior authorization fight.
So the conclusion for Margaret is pretty clear.
It's crystal clear..
Medicare advantage is financially better for Margaret.
She saves over $2,000 a year.
For her, it's a win.
All right, now let's move to scenario two.
Robert, the moderately ill senior.
Robert is 75.
He's managing a couple of chronic conditions like diabetes and high blood pressure.
And in one year, he has a pretty typical run of things.
He sees a few specialists , has an unexpected ER visit, a four-day hospital stay for an infection, and then about 12 days in a skilled nursing facility, or S&F, for reh.
With traditional Medicare Plus Metagap, Robert's total annual cost is still just his fixed premiums.
That $4,500, all that care, which was probably worth $80,000, results in $ out of pocket.
Medagap handles it.
Now, let's add up his Medicare advantage costs.
His premium is still just that $2,200.
But now the copays start to accumulate.
There's a co pay for every specialist visit, every primary care visit, the ER.
Exactly.
Maybe 100 for his primary care visits, 800 for his specialists, another 120 for the ER.
He's already over $1,000 in coays right there.
And then the big bills come from the hospital stay.
Right.
MA plans usually charge a daily coay for the hospital .
Let's say it's $400 a day for the first five days.
His four days stay costs him $1,600.
And the rehab facility.
The S&F stay, yeah.
They might charge $40 to $80 a day after the first few days.
So his 12 days of rehab could cost him another $700.
So you add up all those co-pays, over $3,300, plus his premium of $2,200.
Robert's total cost is now over $5,500.
Which makes Medicare advantage over $1,000 more expensive for Roberts than the Medigap plan.
And that's just the financial cost.
It doesn't even touch the non-financial burden.
Right.
For Robert, he needed a new insulin pump .
That required a prior off.
It was a week long delay while his doctor fought the plan over using a cheaper, older model first.
And then, after his hospital stay, the insurer initially denied his full 12 days of rehab.
They argued he could just do physical therapy at home.
So his family is on the phone for three days, fighting while he's trying to recover from a serious infection just to get the basic care as doctor ordered .
For Robert, the savings vanished, and the hassle was very, very real.
Now for the most serious case.
Scenario three.
Patricia.
The seriouslyior.
Patricia is diagnosed with cancer.
Her involves surgery, multiple PT scans, six months of aggressive chemo , a couple of hospital stays, and a total of 30 days and S&F for recovery.
The total value of her care is well over $150,000.
With traditional Medicare plus Metagab, her annual cost is still fixed.
That $4,500.
Her out-of-pocket cost for $150,000 of cashastrophic care is still zero.
This system completely protects her from financial shock.
Now, with Medicare advantage, Patricia is gonna blow right through her coays and hit her annual out of pocket maximum.
Let's say it's $5,400.
Add her part B premium to that.
Her total cost is now $7,620.
So, financially, she pays over $3,000 more than with Metagap .
But for Patricia, the real tragedy wasn't the money.
It was the restrictions and delays that actively put her health at risk.
First, the network restriction hit her hard.
The best oncologist in her area worked at a comprehensive cancer center about 25 miles away.
But her MA plan didn't have a contract with that center.
So she had to use an in network community practice knowing that she was potentially getting second best care simply because of an insurance contract.
Then came the prior authorization nightmare.
Every single step of her cancer treatment needed approval.
The PETs scanned to see if the cancer had spread , the specific chemotherapy drugs, and when one of the drugs made her violently ill and her doctor wanted to switch to a different one.
The insurer required a 10 day prior authorization review to justiceify the switch. 10 days. 10 days of waiting while her cancer is active, while she's suffering needlessly , just so the insurance company could confirm the more expensive drug was necessary.
That is the definition of compromise care.
And it didn't end there.
There was the fight over her rehab stay.
The surgeon ordered 30 days of recovery in the S&F. The insurer approved the first 15 days, and then just deniedied the rest .
They said she wasn't making sufficient progress and could go home.
So Patricia's family is in a panic, filing an appeal while she's still in the facility, using up emotional energy she desperately needed for healing.
That fight over 15 days of rehab shows how the MA system puts the entire risk of recovery on you when you are at your most vulnerable.
And this all point points to the ultimate hidden cost.
Yeah.
It's the impact on doctor decision making.
Doctors who face this constant battle day in and day out, they admit that they start practicing medicine defensively.
Meaning they might bypass the best treatment if they know it's going to trigger a huge prior authorization fight.
Exactly.
They might choose the second best drug, the one that doesn't need an approval, even if the best one is a little more effective, they'll order a CT scan instead of a better MRI because they know the CT scan will get approved instantly and they can get a diagnosis faster.
So in original Medicare, the doctor asks, what's the best thing for my patient?
In Medicare advantage, the doctor is forced to ask, what's the best thing for my patient that the insurance company will approve this week?
And that one question fundamentally changes the quality of care you receive.
So we've seen the money, the mechanism, the real world impact.
Let's zoom out now and look at the big picture, the systemic costs and the political paralysis that keeps this whole system going.
Let's use that pizza shop analogy one last time, because it sums up the business model perfectly.
If the shop gets paid a flat fee per person , the incentive is no longer to make the best pizza.
The incentive is to sign up people who rarely eat pizza.
And to make the pizza really, really inconvenient to get when they do want it.
Denying an MRI or cutting a hospital stay short.
Yeah.
Those are the pizzas the MA company didn't have to make, and that's pure profit.
So in this multi-billion dollar game , who are the winners and who are the losers?
The clearest winners are the insurance companies.
These are massive conglomerates like United Health Group, worth over half a trillion dollars.
Their profits from Medicare advantage are in tens of billions every year.
And that profit is generated directly from the gap between the generous government's payments and the lower costs they get by restricting care.
Healthy seniors are also short term winners, no doubt.
They get that $2,000 in annual savings, plus the dental envision , but they are, in effect,, being subsidized by those taxpayer overpayments and by the sick people in their plan who are hitting their high out of pocket maximums.
And we can't forget the insurance brokers.
Oh, they win big.
They can get a commission of $600 or more for signing someone up for an MA plan.
The commission for a Medigap policy is much, much smaller.
That creates a massive financial incentive for brokers to push MA hard. Sometimes without explaining all the details about networks and prior off.
The list of losers, though, is much longer.
At the top of the list are the six seniors, like R.
Robert and Patricia.
They face higher costs, endless restrictions, and just immense hassle when they're at their weakest.
Taxpayers also lose footing the bill for that $20,000 to $25 billion in annual overpayments from the risk coding games.
And critically, the Medicare Trust fund itself is a major loser .
These huge payouts to private insurers are speeding up the funds in solvency date, which is now projected for 20231.
So that leads to the big big question.
If this system costs taxpayers billions more and hurts the sick people, why on earth does it continue?
And that's the political protection rack?
The industry's political power is just immense.
They spend over $50 million a year lobbying Congress .
They donate huge sums to both parties, to both Democrats and Republicans, ensuring they have access and protection, no matter who's in charge..
And if a lawmaker even suggests a modest reform, like trying to cut back on that $25 billion in overpayments..
The industry immediately unleashes these coordinated, very expensive attack ads in that politician's home district.
The ads are designed to scare seniors.
They say the politician is cutting your benefits or taking away your dental plan.
Even though the proposed cuts are only targeting corporate profits .
But that political threat is so toxic, especially with 31 million seniors on MA plans who vote in huge numbers, that reform just dies on the vine every single time.
The nuance is just completely lost.
The fear of being called anti senior is more powerful than the responsibility to protect taxpayers and ensure good care.
And this political protection just fuels this grim trajectctionory and feedback loop.
MA. Enrollment is on track to pass 60% of all Medicare beneficiaries by 2030.
Which creates a self perpetuating cycle.
It does.
More people in MA meet means fewer people in traditional Medicare.
The people left in traditional are on average, sicker and more expensive .
That drives up the average per person cost of traditional Medicare.
Which is what the MA payment is based on.
So the MA payments go up, which means higher profit margins, which funds more marketing, which drives more enrollment.
And the cycle just repeats, locking us into a system based on private companies, maximizing profit from public funds.
But it doesn't have to be this way.
The sources laid out a few paths forward, a few reform options.
Right.
Option one is to fix Medicare advantage itself.
You don't have to eliminate it, but you have to hold it accountable.
That means aggressive, mandatory audits of their coding to stop the risk adjustment fraud.
And it means cutting the payments so they're no more than 100% of what traditional Medicare costs.
Take away that built in incentive to overbill.
And you need strict rules on prior authorization.
Prohibited completely for things that are almost never denied anyway .
Demand a 24 hour turnaround for urgent requests and publicly report every single plan's denial rates and appeal reversal rates.
Transparency would force them to compete on value, not on bureaucracy.
Okay, that's option one.
What's two?
Option two.
Bst traditional Medicare .
Take that $20,000 to $25 billion in annual overpayments and put it back into the traditional program.
You could easily use that money to the very benefits MA uses as a selling point dental vision, and hearing to Medicare for everyone.
Or you could use it to subsidize Medag plans for lower income seniors, ensuring that everyone has access that complete financial protection without giving up their freedom of choice.
And the third option.
Option, a public option.
The government could create its own nonprofit Medicare advantage plan.
How would that work?
It would use the universal traditional Medicare network of doctors.
It would have a fixed out of pocket max .
And critically, it would require no prior authorization for most medically necessary services.
So it would force the private profit plans to actually compete on things like quality and service, not on who can deny care most effectively.
Exactly.
It would change the entire competitive landscape.
So let's bring this all home.
We have to end with the most important practical advice for you if you're turning 65 soon , because this decision, for many people, is irreversible.
If you are approaching 65, the single most important choice you will make is during your initial guaranteed issue enrollment window.
If you have any serious or chronic health conditions, or if you just value simplicity and freedom of choice , you have to strongly consider original Medicare plus Medagab during that time.
You have to really understand the trade-off.
You do.
Saving $2,000 a year now with a low premium MA plan could cost you tens of thousands of dollars later, not to mention the delays and restrictions, when you eventually need complex.
And the most critical piece of advice is about switching back.
If you're in an MA plan and you realize it's not working for you.
In most states, if you want to switch back to original Medicare and get a Medagap policy , you will have to go through medical underwriting.
Which means the Medigap insurance company can look at your entire medical history.
They see your diabetes, your heart condition, your past cancer diagnosis, and based on those preexisting conditions, they can legally deny you coverage completely or charge you outrageously high premiums that you can't afford.
That's the trap.
The moment you leave that Metaap safety net for what looks like savings in MA, if you get sick and realize you made a mistake, in most of the country, that door to guaranteed, comprehensive financial protection slams shut behind you.
Medicare advantage started with a good idea. Bring efficiency to a wastul system.
But what our sources show today is a public private partnership that is just, It's defined by perverse incentives and political protection.
It costs the public billions, it enriches huge corporations, and it creates these terrible barriers for the people who need health care the most, this seriously ill.
And this whole deep dive really challenges you, the listener, to think about what the fundamental mission of Medicare should be. .
Should it be a public insurance program that pays doctors directly, that ensures universal access, and that prioritizes simplicity?
Or should it be a system where the government pays price private, for-profit companies to manage, restrict, and ultimately ration the care, all to maximize returns for their shareholders?
The future of the Medicare Trust fund is really tied to how we answer that question.
And until we fix that core incentive structure, the overbilling and the delays are just going to continue.
And if we had to write the truly honest tagline for Medicare advantage, based on everything we've looked at today, would have have to be this .
Low premiums and extra benefits when you're healthy, restrictions, hassles, and higher costs when you' sick, please don't