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Medicare Advantage skewed toward lower income non-white enrollees

May 8, 2012

Medicare Advantage is a health plan for seniors offered by private insurance carriers as an alternative to traditional Medicare coverage. The attraction and trade-off is that enrollees in Medicare Advantage typically avoid the deductibles and out-of-pocket expenses of traditional Medicare coverage but limit their choice of providers. The core funding comes from the federal government and sometimes enrollees purchase an additional enhancement of benefits. Some envision Medicare Advantage coverage as falling somewhere between Medicare and Medicaid.

This new report says that the Medicare Advantage program is skewed toward lower income non-white retirees. While this has always been a common assumption in the financial planning industry, I’ve not actually seen a report backed by data that supports this conclusion. The report is presumably produced for the purpose of influencing public opinion to prevent the federal government from cutting funding to the Medicare Advantage program.

A report on Medicare Advantage produced by America’s Health Insurance Plans says the private program is a "vital source" of coverage for low-income and minority Americans. While 26 percent of beneficiaries nationally are enrolled in Medicare Advantage plans, the figure is 29 percent for African-American beneficiaries and 36 percent for Hispanic beneficiaries, according to the AHIP report, which was based on publicly available Centers for Medicare and Medicaid Services data.

In addition, 43 percent of all beneficiaries enrolled in Medicare Advantage had annual incomes of $20,000 or less, and 64 percent of non-white beneficiaries in the plans had incomes of $20,000 or less.

Simply stated, I continue to recommend Medicare Advantage plans to those individuals whose concerns over cash flow outweigh concerns over quality of care.

(Disclosure: I am an individual member of the association America’s Health Insurance Plans (AHIP) that produced the report.)

WSJ Professional Article – WSJ.com

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