A Closer Look
Rapid growth in Medicare costs is a critical issue that continues to stretch our nation's financial resources, burden taxpayers and threaten our already fragile economy. According to projections, the problem will only get worse, with Medicare consuming an ever greater percentage of America's gross domestic product.
The current, Original Fee-for-Service Medicare program is not designed to achieve outcomes beyond paying beneficiaries' claims and guarding against fraud and abuse in the program. Lawmakers built the Medicare program on this limited model in 1965 – and little has changed.
The Problem: Federal spending, as a percentage of gross domestic product
Source: Congressional Budget Office
Now more than ever, our nation must use its healthcare dollars wisely. Instead of simply curing illness, we must foster wellness and develop ongoing strategies to coordinate care, manage chronic disease and improve overall health.
The Medicare Advantage program unites these elements, making it an important choice for people with Medicare and a valuable tool that – over the long term – can help the Medicare system overcome its cost challenge.
Medicare Advantage: A Focus on Well Being
More than ten million Medicare beneficiaries, or more than one in five of those eligible for Medicare, rely on Medicare Advantage plans to keep them healthy, alert and active. Once enrolled, fewer than 2 percent of Humana Medicare Advantage members return to Original Medicare.
Why are these plans so popular? Medicare beneficiaries in Humana Medicare Advantage plans receive a coordinated approach to healthcare not generally offered by the traditional Medicare program. Going beyond coverage and claims processing, Humana's Medicare Advantage plans strive to help members improve their overall well-being with programs and services like:
- Support programs that help members work effectively with their physician to manage chronic diseases or conditions
- Care-coordination services for members with chronic or complex conditions or multiple diagnoses
- Telephonic nurse support designed to improve outcomes and offer peace of mind
- Senior-focused fitness programs designed to improve strength, flexibility, range of motion and cardiovascular condition
- Educational life-enrichment programs and classes, such as cooking, nutrition, fall prevention and smoking cessation
- Personalized statements detailing healthcare and prescription expenses
- Discounts on vision care, dental care, over-the-counter drugs and complementary and alternative medicine
The Medicare Advantage program is also a vital safety net for many rural and low- or moderate-income beneficiaries - especially those who earn slightly too much to qualify for Medicaid. For them, Medicare Advantage plans often provide a more affordable alternative to Medicare Supplement or Medigap policies. The extra attention to wellness, prevention, care coordination and disease management is also important to low-income and minority beneficiaries, who may suffer disproportionately from certain conditions, such as diabetes.
The Advantages of Medicare Advantage
Medicare Advantage plans are proving they can have a beneficial impact on two separate but important measures of success: health and cost.
Helping People with Medicare Live Healthier Lives
Humana Medicare Advantage members are readmitted to the hospital at a rate 4 percent lower than beneficiaries on Original Medicare. The advantages are even more pronounced for members with chronic conditions. As the table below shows, members of Humana Private-Fee-for-Service Medicare Advantage plans average three fewer days in the hospital each year versus people covered by Original Medicare, even when adjusting for differences in the health of those two populations.
Severely Chronically III Patient
Sources: 2006 Medicare 55 sample provided by Reden & Anders, trended to 2007 and geographically adjusted to Humana's membership mix; Humana's 2007 claims, adjusted to FFS risk mix
Helping People with Medicare Advantage Afford Healthcare
No matter what kind of plan they use (HMO, PPO or Private-Fee-for-Service), people with Medicare Advantage – on average – spend less out-of-pocket than those on Original Medicare.
Across representative populations, Medicare Advantage products offer lower costs to Medicare beneficiaries. Individual savings opportunities can be significantly higher depending on medical events.
Average Annual Out-of-Pocket Cost per Member
Source: Reden and Anders; 2005/2006 trended to 2009.