Wall Street Journal Examines Increased Popularity of Medicare Advantage Plans

The Wall Street Journal on Tuesday examined how hundreds of thousands of Medicare beneficiaries have begun to enroll in Medicare Advantage plans, which offer "traditional benefits without the usual restrictions on access to doctors and hospitals" and some additional benefits. Under Medicare Advantage plans, the federal government, rather than pay claims directly, pays health insurers to manage care for Medicare beneficiaries in an effort to reduce program costs. According to David Lewis, acting director of the Medicare Advantage Group at CMS, enrollment in such plans increased to 802,068 on Aug. 1 from 20,000 in 2003. The "freedom of choice" in Medicare Advantage plans makes them popular among beneficiaries, the Journal reports. In addition, Medicare Advantage plans on average cost beneficiaries less than traditional Medicare, according to the Journal. As a result of the increased popularity of Medicare Advantage plans, some large health insurers "are launching more of such plans and marketing them in more areas," the Journal reports. Scott Latimer, market president for central and northern Florida at Humana, said, "The opportunity to market other products to customers with whom we already have a relationship is that much greater." Dan Mendelson, president of Avalere Health, said that he expects "dramatic growth" in the market for Medicare Advantage plans next year. However, "some wonder how long seniors can take advantage" of Medicare Advantage plans, the Journal reports. A report from the Medicare Payment Advisory Commission released earlier this year found that the federal government on average pays 11% more for physician and hospital services under Medicare Advantage plans than under traditional Medicare (Zhang/Fuhrmans, Wall Street Journal, 8/29).