Medicare Part C

Traditional Medicare is Part A plus Part B plus Part D plus the possibility of a supplemental policy.  A+B+D will give an acturial value of roughly 82% for the typical Medicare beneficiary. Beneficiaries have unlimited maximum liability as co-insurance for the doctors and the drugs are not capped.   Claims are paid predominately on a fee for service basis so the provider incentive is to do more for Part A and Part B.  The hospital and provider network is extremely broad in traditional Medicare.

The Part A+Part B structure was pretty much the only configuration for Medicare until the late 70s when Medicare HMOs were created.  These were renamed in 1997 as  Medicare Choice HMOs. This later got rebranded into Medicare Part C  or Medicare Advantage plans.  These plans are privately run HMO plans.  They have significant operational differences.

Medicare Advantage (MA) programs require participants to continue to pay their Medicare Part B monthly premium.  Most MA plans will have an additional monthly premium.  That monthly premium covers administrative overhead as well as services that look more like Medicare Supplemental plans as annual expenses are capped and those caps require some additional funding.  Furthermore, MA plans tend to offer additional vision and dental benefits.  As a marketing and risk selection tool, some Medicare Advantage plans will offer health club memberships to cherry pick younger and healthier Medicare beneficiaries.

Insurance companies receive a risk adjusted capitation payment.  The Center for Medicare/Medicaid Services (CMS) calculates a risk score (which I talked about here) based on diagnostic history of an individual and applies a suitable multiplier to the base rate.  A perfectly healthy 65 year old will have a much lower base rate than a 97 year old on chemo.  Once the insurance company receives the money, they are free to do with it as they wish with some limitations.

Cost sharing is common.  A shared deductible that pools in-patient, outpatient and drug expenses is common.  Co-pays and co-insurance tend to be universally applied.  Higher premium plans will have lower out of pocket expenses.  Cost sharing however is capped.  Under traditional Medicare, a beneficiary with Hep-C, cancer and rheumatoid arthritis that led to a broken bone requiring surgery is in far worse shape financially than a member with a capped out of pocket Medicare Advantage plan.

Plans are based on either PPO or HMO designs. Most Medicare Advantage plans are HMOs which force members to go through their primary care providers before they get specialist care.  Networks are more limited than traditional Medicare.  The more someone pays in Medicare-C premiums, the wider the network tends to be.

So far this sounds all good, or at least closely indifferent from traditional Medicare.

The biggest problem with Medicare Part C is that it was ridiculously expensive.  Before PPACA was passed, Medicare Advantage plans were getting paid 14% more for the same member as it would have cost for traditional Medicare to cover.  This was a combination of excessively high cost floors put into place by Congress, and then aggressive upcoding of disease burden.  Aggressive upcoding makes someone look and bill sicker (and thus higher) than they otherwise would have been.

Traditional Medicare is not risk adjusted so CMS is not sending thousands of coders/educators to physician offices to make sure every potentially valid diagnosis is on a claim.  Medicare Advantage plans do that.  It is legal to make sure that every valid diagnosis is on a claim.  It is illegal to create claims with invalid, nonsensical or false diagnosis levels.  Upcoding probably costs the government $10 billion dollars a year.

PPACA has changed Medicare Advantage.  The three biggest changes were on benefits as preventative services are now cost-sharing free, base line capitation rates as the base has decreased, and a re-adjustment of the risk adjustment model that attempts to adjust for the upcoding trend.  These last two changes are the source of $700 billion dollar first decade savings in Medicare that were used to pay for the coverage expansion components of PPACA.  Between improving quality of Medicare Advantage plans and the much smaller price gap, it is highly probably that Medicare Advantage plans provide roughly the same value (cost/Effectiveness/quality) as traditional Medicare now.

47 replies
  1. 1
    MazeDancer says:

    Did not realize that Medicare Advantage covered dental and vision. Can see why people would like that.

    Medicare Advantage plans, because they are not standardized, are among the most confusing aspects. My mother, trying to figure out which doctors were in which plans never made a choice she liked. And eventually just went back to AARP supplemental because it seemed the clearest and easiest.

    In the NorthEast, one can live near state borders and find the nearest hospital and best doctors are in a different state. As the Florida economy can attest, Medicare pays everywhere so going on an Advantage plan, if the HMO is limited to one state, erases the “advantage” of being able to cross state lines. Also, having to get a referral for a specialist cuts down on “recreational medicine”, also popular in Florida, where people go check out different experts.

  2. 2
    Xantar says:

    This is why technically Obamacare cut Medicare. It cut wasteful, useless spending which didn’t affect anybody’s actual health care services, but it’s still a cut.

  3. 3
    Oatler. says:

    Trying to figure out if Advantage would let me get rid of my supplemental which is costing me about 100/month. I’ve taken this to various local agencies and they are “still trying to learn all this”. Adding to my stroke difficulties, I get the feeling neither of us on either side of the desk knows what we’re talking about.

  4. 4
    buckydoc says:

    Richard, I’ve enjoyed reading your Medicare series. It’s astonishing how poorly most folks understand something so fundamental to our healthcare system.

    Up until this point, the series has been dispassionate, but your Part C installment certainly less so.

    It’s worth pointing out that the key difference between Part B and C is that Part C does not reward the widget-based medical practice that helped drive costs through the roof and lead to jaw-dropping regional variation in procedure utilization.

    Instead, the goal of Part C = pay providers (by way of the insurer) for actually taking care of patients’ chronic illnesses. In our organization we convey this to our physicians as ‘Managing Clinical Risk.’ Moreover, the Medicare ‘Stars’ program provides a potent set of incentives (and disincentives) to ensure Part C plans adhere to quality standards.

    Are there ways to game the system? Absolutely. But this I can say from personal experience… my organization lives in abject fear of a RAD-V coding audit, and are scrupulous about training docs how to avoid upcoding.

  5. 5
    PurpleGirl says:

    Richard, I have a personal question to ask. My niece sent me a picture (though FaceBook) of a man sitting on bench and holding his head in his hands with the caption of roughly “I couldn’t afford health insurance before and now after Obamacare the IRS is fining me for not having insurance I can’t afford.”

    How can I answer her. In my gut I think it’s political crap but I want to be on solid ground when I tell her so. I’m sure it must be tied to her sister who is RWNJ. The niece who sent the picture is a low-income single mother. I really want to tell her not to send me any political crap like that. Thank you in advance for any answer. (That goes for any BJer too.)

  6. 6
    mai naem mobile says:

    Richard -I hope you can answer a question me. I have a friend who just went on traditional medicare with a supplement. He said the insurance saleswoman told him that you can’t change from the supplement you pick(unless you go through underwriting.) Is that true? I thought that was only if you were on dialysis.

  7. 7
    Richard Mayhew says:

    @buckydoc: I might have used the wrong phrase.

    Let’s take the following hypothetical patient who is showing up for an annual well visit.

    The patient that presents with Diabetes Type 2, psiorisis, hyper tension, and a history of cancer (since in remission for 5+ years).

    Under Medicare Advantage risk adjustment, your incentive at a wellness visit is to code all 4 Dx’s as that will get you 4 HCC checkmarks and thus a higher risk adjusted score.

    It is legitimate coding.

    A doc that is treating the same exact patient under traditional Medicare might code only the diabetes, psiorisis and hyper tension as those are the current problems that require treatment/management/awareness. The cancer V-code has no reason to show up on the claim as the doc is not getting paid for that V-code under traditional Medicare. Sometimes the v-code shows up on a claim/encounter, sometimes it does not.

    This is also legitimate coding.

    In neither case is it unethical, fraudulent or wasteful. It is the incentive to comprehensively code according to the HCC model that promotes “over-coding” in Medicare Advantage compared to traditional Medicare. People do what they get paid to do, and Medicare Advantage pays people to code everything, so they code everything.

  8. 8
    Richard Mayhew says:

    @mai naem mobile: Go look at AARP, as they are a far better resource on the nuts and bolts of Medicare than I am.

  9. 9

    Thanks for doing all of these posts about the intricacies of Medicare system, Richard. I know it’s an easy and cheap political slogan to say “Medicare for All!” but there are a lot of workarounds and kludges in the current system that would need to be fixed before it could be extended to everyone. It’s certainly not impossible to do, but we have to be honest about the changes that would need to be made in order to do it.

  10. 10
    Richard Mayhew says:

    @PurpleGirl: There are a couple of corner cases where this would be true.

    1) Someone whose spouse is offered “affordable” insurance at work that is only affordable for a single individual and not family coverage. The non-offered spouse and the rest of the family is not eligible for subsidies, so if they are old, it is quite plausible that off-Exchange/non-subsidized insurance is expensive as fuck (this is the “Family Glitch”

    2) Single person making between 200% and 300% FPL where the expected individual contribution if between 6% and 7% of personal income. 200% FPL is only 23,000/year, so coming up with $115-$150/month for subsidized coverage is tough (although the fine is less than half of the expected individual contribution)

    Those two cases, people are getting screwed, and in a normal political environment, minor technical fixes and or throwing money at the problem to enrich the subsidy values would solve these problems. Now they are fucked.

    In most cases, it is bullshit though but it is anchored on a reality.

  11. 11


    Does your niece live in a Medicaid expansion state? If not, there could be a bit of truth to her claim, but it’s not Obamacare’s fault, it’s the fault of her asshole legislators and/or governor who refuse to let her have insurance.

  12. 12
    buckydoc says:

    @Richard Mayhew: The key point … and something that I’m confident the data will bear out… is that this isn’t merely about coding. It’s actually about providing care and improving outcomes.

    So, imagine a patient with Type 2 diabetes with diabetes-related kidney problems. In a Part B practice, the physician may simply code 250.00 and do nothing more than refill her insulin. In a Part C practice, the physician is rewarded for recognizing the patient’s kidney problem and in so doing, is more likely to provide the care required to prevent those problems from progressing.

  13. 13
    PurpleGirl says:

    @Mnemosyne (tablet): No, she lives in NYS. She works as a cashier at a gas station/convenience store. I’m not entirely sure of the situation with her husband but they haven’t lived together for years and she’s raised her son ‘alone’. She lives in outside Saratoga with her mother. I would think she’s eligible for Medicaid. BTW, her sister, my other niece is married to a doctor and has over the course of her marriage become much more of a RWNJ, as is my sister. ETA: Her mother and her sister talked her into moving upstate with them as a safer place and better place to raise her son. You know, NYC is just a drug-filled thug place with bad schools. Well, there are no good jobs up there for unskilled people and her son has graduated HS without plans for any further education or job. RWNJ sister and mother have to idea for a better job for this niece. (The other niece is a teacher and gives advice as if she’s a doctor too.)

    @Richard Mayhew: Thank you. This will have to be a longer e-mail answer to her. I feel compelled to give her a response, because, well, it needs a response.

  14. 14
    Richard Mayhew says:

    @buckydoc: Precisely, and that is why I included the final line:

    Between improving quality of Medicare Advantage plans and the much smaller price gap, it is highly probably that Medicare Advantage plans provide roughly the same value (cost/Effectiveness/quality) as traditional Medicare now.

    A good Part C plan has the incentive to manage chronic conditions better because it is on a capitated health management model while traditional Medicare is (mostly) still on a fee for service widget management payment model where a complication 6 months from now is a revenue opportunity instead of a cost-sink.

    Right now on quality/cost the typical Medicare Part C plan and the average treatment for a Traditional Medicare member is a coin flip… the best Part C plans are a net social win and should be encouraged to expand or at least best practices stolen ruthlessly and widely disseminated.

  15. 15
    nanute says:

    @ Oatler: Under Medicare Advantage plans you cannot have supplemental coverage. It is basically covered under the Advantage plan system.

  16. 16
    buckydoc says:

    @Richard Mayhew: I think it’s worth underscoring your final point… There’s an enormous difference between a Part C plan that’s administered within the context of a quality-oriented integrated delivery system like Kaiser or Group Health and one that’s really nothing more than an insurance product. In my view, the real benefits of Part C accrue only in the former case.

  17. 17
    Ruckus says:

    This may not be applicable but I know of a woman whose 91 yr old husband was getting sicker and sicker until he became bedridden. He was still quite lucid and she was not going to put him in a home. But the cost for 24 hr home care is not all that cheap. He’s a WWII vet and qualified for VA care, which has a program to pay for home care. But she wouldn’t actually talk to the VA. She spent about 4 months talking to every organization that professes to help on with the VA bureaucracy. For a donation. I helped her fill out the VA forms twice but she still resisted going to or calling the VA. She didn’t trust them. And yes she is a republican, doesn’t trust nor believe in the government’s ability to actually do their job. Everyone else “helping” them, yes. When she finally went to the VA, she was amazed at how helpful they were. But she hated asking for help, that made her and her bedridden husband weak. And you know you can’t have that.
    The bottom line is look online at the NYS ACA website. You will find the answers there and can give them the info. I’d bet she won’t look herself. Bet she gets told the right wing ongoing story, the government can’t help, it’s totally incompetent.

    Maybe tell her that’s why it’s insurance companies that are actually doing the work. Whatever it takes to get her the help she needs.

  18. 18
    PurpleGirl says:

    @Ruckus: My niece could do the research herself; she did a remarkable job of research after her son was born and they thought he had a genetic blood disorder and she took on her-then insurance company for the testing he needed.

    I think she’s panicked about getting her son help with substance abuse. He’s had a few incidences with the police over pot, may or may not be an all out addict. (See reference above to NYC as thug and drugy place but not nice rural area… ha!) A residential program will cost thousands and there aren’t enough programs of any sort anywhere in NYS.

    They wanted me to move upstate also but Saratoga is in the one county without a county transit system. I don’t drive (medical issue). I’d have been lost of up there.

    Thank you for the comment.

  19. 19
    Thoughtful Today says:

    Or …. instead of making insurance more complicated than understanding the endocrine system …

    Please consider supporting Universal Health Care for all Americans.

    Currently, the only Presidential Candidate supporting a “Medicare for All” / single-payer health-care system for every American is Bernie Sanders:

  20. 20
    WereBear says:

    I’ve been reading “medical memoirs” since the mid-60’s… when I learned to read.

    And I can state that fully HALF of the content in a US-based book now dwells on the further torment and suffering that happens from dealing with the US medical system and the insurance companies thereof. Even caring doctors are caught and ground up, so if you get the other kind it becomes truly horrifying; like in the book I just finished where a woman with a serious stroke is bullied into chemotherapy.

    I read the Canadian classic, The Bear’s Embrace, about a woman who had an upper quadrant of her face gnawed off by a bear, and she never, ever, had to deal with such crap on top of her horrifying injuries and the adjustment problems thereof. Yes, she committed suicide after about 20 years, from intractable mental and physical pain, but I suspect in the US it would have been much sooner…

  21. 21
    Richard mayhew says:

    @Thoughtful Today: this is Medicare as is troll.

    Anyone have a good peanut butter cookie recipe?

  22. 22
    buckydoc says:

    @Thoughtful Today: I’m a huge fan of Medicare for All…. but, complexity-wise, we’d be talking 12 dimensional endocrinology. Richard’s last four installments give us a little glimpse into the challenges that must be addressed (and I actually don’t mean to imply that Richard himself supports a Medicare for All solution)

  23. 23
    PurpleGirl says:

    @Richard mayhew: Hmmmm, peanut butter cookies. Yum. Sorry, I’m not a cook and don’t have a recipe to share with you but applaud your wanting to make some.

  24. 24

    @Thoughtful Today: Could someone please just ban this fucking spammer?

  25. 25
    Thoughtful Today says:

    Richard, you’re helpful to many people here and I appreciate that.

    But I get that you genuinely confuse insurance with health care. And I get that you personally are financially rewarded by our current regressive system.

    But Ialso know Canada, Europe, and Japan have superior systems that manage to cover more of their Citizens than the US’s corporate system.

    Our corporate system is a multi-billion dollar giveaway to insurance companies that use that money to pay for the politicians that keep their criminal leaching legal.

    Medicare has lower overhead, it’s literally more efficient than the corporate insurance schemes.

    And when well managed Medicare can be more effective in myriad ways. Saying otherwise is false and if you’re half as informed about health care as you are about insurance schemes you know that’s true.

  26. 26

    @Thoughtful Today:

    I explained this to you multiple times with multiple links in the other thread. I will try this one more time:

    Japan has a “corporate” health care system. They do not have single payer.

    Germany has a “corporate” health care system. They do not have single payer

    Switzerland has a “corporate” health care system. They do not have single payer.

    There are multiple ways to get to universal healthcare. The one thing that all three of the above counties have in common is that their insurance companies are NON-PROFIT.

    Single payer is not the be-all or end all. Single provider (which is the UK’s system) is not the way most of the rest of the world does it.

    There is more than one way to get universal healthcare, and every country does it a little differently.

  27. 27
    Richard Mayhew says:

    @Thoughtful Today: Who likes pie?

  28. 28

    @Richard mayhew:

    You can make peanut butter cookies with only three ingredients: peanut butter, sugar, and egg. Plus they’re gluten-free and FODMAPs-friendly made that way:

  29. 29
    gorram says:

    @@PurpleGirl: Admittedly it wasn’t for drug use/addition, but I’ve had family get involved in those types of residency programs and they haven’t really worked at all. Plus, there’s a lot of insurance providers who write them off as medically unnecessary (even while doing everything possible to get parents on board with sending their kids to them). Every part of them seems designed to mislead – they’re medically necessary (according to some) until it comes time for insurance to pay, they’re about helping younger people learn to function outside of the assumed toxicity of their home environment but they don’t really help people learn to navigate the rest of the world any better or prepare them to repair relationships with the people in their home environment. Basically, I’d strongly recommend against those sorts of programs, especially for people of color and LGBT people (parents or patients).

  30. 30
    Richard Mayhew says:

    @buckydoc: Behind the veil of ignorance/starting from scratch — Medicare for All with some significant tweaking on the technical end (ie OOP limits, more capitation/global budgeting, way less FFS etc) is one hell of a good idea. Not the only idea, but a damn good one.

    Getting in front of the veil of ignorance and acknowleding a political system that has multiple formal and informal veto points, acknowleding that concentrated losses produce bigger screams and more resistance than dispersed gains produce applause and support, acknowledging that quite a bit of our tax and payment system is skewed to employer provided health insurance model, and acknowledging that transitioning from one model to another is a cast iron son of a bitch mega-PITA problem, I don’t see it as a feasible route to universal or near universal coverage.

    The Dutch/Swiss model is far closer to feasible given initial starting conditions in the US, IMO.

  31. 31
    Ruckus says:

    @Thoughtful Today:
    All useful info. Also useless info.
    You want to pimp Bernie Sanders, that’s great. Richard’s posts are not the place to do that.

    So, bottom line. Fuck off.

  32. 32
    Ruckus says:

    @Richard Mayhew:
    Ahhhhh, Cleek’s bakery. A wonderful place. Full of calmness and grace.
    Used sparingly it is a wonderful place to hide idiots and assholes.

    ETA I feel better already.

  33. 33
    Ruckus says:

    @Richard Mayhew:
    Practicality does fly right over some peoples heads, doesn’t it?

    Our new friend in the pie shop, for example.

  34. 34


    If he’s mostly in trouble with pot, I would seriously advise getting him a general mental health screening first. It’s quite possible that he’s self-medicating for depression, bipolar disorder (aka manic depression), ADHD, or something else. Plus it can sometimes be a little easier to get mental health services than addiction services since they usually don’t require an inpatient stay. Check into their county’s mental health services to see what the screening options are.

  35. 35
    Thoughtful Today says:

    I’ve done my homework, Richard.

    I know that what you think is inconceivable has been implemented in Europe, Canada, and Japan.

    I’ve personally seen the Brit’s socialized medicine system in action and it was faster, more effective, and more efficient than the corporate insurance system that you support.

  36. 36

    @Thoughtful Today:

    From Wikipedia:

    All residents of Japan are required by the law to have health insurance coverage. People without insurance through employers can participate in a national health insurance program administered by local governments.

    Your pie-in-the-sky view of how universal coverage works does not fit reality. Richard is attempting to explain reality to you, but you keep demanding unicorns that poop rainbows rather than being able to examine the system we have now with an eye towards making it a universal system.

    Please shut up and let the adults talk.

  37. 37
    Richard Mayhew says:

    @Thoughtful Today: No you have not done your homework as @Mnemosyne (iPhone) has demonstrated. There are numerous ways to get to universal or near universal coverage. Single payer is one of those varieties. The best systems in the world (France/Japan) are not single payer systems.

    Can the US do better — fuck yes.

    Is national single payer a probable way of getting there. Nope, not if there were never 50 votes in the Senate in 2009 for negoatiated rate public option. And a negoatiated rate public option on a public exchange with private competitors is at least 3 gigantic leaps of logic away from Medicare for Everyone.

    I don’t care how much you kick and scream about a magical 50 state strategy, the marginal decision maker in the US for a single payer system is coming from either a R+4 congressional district and so is either fairly conservative or benefited from a combination of a mistress choking incident OR a national wave due to a cluster fuck of a war combined with a drowned American city OR a national wave due to the greatest economic crisis in 80 years. And the marginal Senator is representing (at best) a state that voted 8 to 10 points more Republican than the nation in 2012. Every Olympia Snowe means the marginal Senator is probably a point more conservative than the best case scenario.

    2009 had a significant wave of Red State Dems (Alaska, Montana, both Dakotas, Indiana, Louisiana, Arkansas etc) where any vote for single payer is a vote to lose.

    HOW do you assemble a coalition of 218 Reps much less 60 Senators to be significantly more liberal than the 2009 Congress on an even less friendly, more polarized and more correlated map?

    Magical ponies are not a valid answer.

  38. 38


    It really depends on the kid and the program. An actual psychiatric boarding school with therapists and teachers helped my nephew immensely, but he has severe ADHD and bipolar disorder, not an addiction, and the place he went was set up to treat kids with psychiatric problems. Plus he really did have a crappy home life that he needed to spend time away from (untreated bipolar/addicted mom, ADHD/bipolar dad who’s spent most of his adult life in jail, elderly grandparents who couldn’t take him). And it was a state-certified program that allowed him to graduate from high school with a diploma from his local public school.

    But, yes, a LOT of the “troubled kids” programs are bogus and often actively harmful. You need a real school staffed with professional therapists, teachers, and doctors, not some screwed-up “tough love boot camp” with unlicensed psychos running things.

  39. 39
    WereBear says:

    @Mnemosyne (iPhone): I was thinking of that but didn’t have time to track it down.

  40. 40

    Put for-profit companies in charge of health care. Why, what could possibly go wrong?

  41. 41
    Richard Mayhew says:

    @Raven on the Hill: I am not saying that either — look at the Dutch model for a good example of a multi-payer system that works really well that is only a hop-skip and a jump from the US model instead of a BASE jump across the Grand Canyon.

  42. 42
    Thoughtful Today says:

    [sigh] … So true:

    Bernie: “We have millions of people who are struggling to keep their heads above water, who want to know what candidates can do to improve their lives, and the media will very often spend more time worrying about hair than the fact that we’re the only major country on earth that doesn’t guarantee health care to all people.”

  43. 43
    Ian says:

    Missing a digit: “Medicare Advantage plans were getting paid 14% for the same member” should be 114%, or “14% more”, or whatever.

  44. 44
    Richard Mayhew says:

    @Ian: good catch

  45. 45
    Thoughtful Today says:

    It’s unfortunate Mike Bloomberg deleted many of the old articles.

    Back in 2007/8 I could link to an excellent BusinessWeek article that explained that the Veteran’s Administration, after increasing managerial oversight in the 90’s, provided better health care than any corporate insurance scheme.

    Current management of the V.A. is … deplorable, but at least marginally better than the management that created the Walter Reed Hospital scandal.

    Nonetheless, solid management of the socialist health care system of the Veteran’s Administration provided stellar results.

    Effective Executive leadership of a national health care system is not inconceivable as many believe.

    Bernie understands that:

  46. 46

    @Richard Mayhew: what leap? Medicare is a single-payer system. I don’t see any reason to privatize it.

    You mention the Dutch system, but that is both heavily regulated and designed for something more like a single US state than a vast federal republic. Putting that much regulation into a US system is nearly impossible. Perhaps you support it, but the top executives of many insurance firms do not, and they have enormous political pull.

    I’m feeling exceptionally bloody minded about health insurance today. My medical clinic just reminded me that “preventative care” is a political euphemism for screening tests, and actual preventative care, even something as minor as renewing a prescription for a life-sustaining medication, is billable to the policyholder, and we have to scrape together the money to cover it.

  47. 47

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