Health care is a big line item in the budget for most advisors’ clients, particularly those who are seniors (or closing in on that demographic). For this group, helping clients navigate their Medicare options has always been a major planning concern. Now, with expanded Medicare Advantage benefits in effect, you and your clients have additional information to evaluate, including a new open enrollment period.

In January 2020, Medicare Advantage plans began offering expanded supplemental benefits intended to improve the health outcomes of enrollees. Although their effectiveness won’t be known for some time, the new benefits could change your clients’ care planning decisions. Depending on an individual’s health, the expanded Medicare Advantage benefits may be more appropriate than those offered by traditional Medicare. Before considering the new benefits, however, let’s review how the pieces of Medicare fit together.

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Medicare’s Parts

Here's what’s covered under each of Medicare's parts:

• Part A: Covers hospital, hospice care, and some types of inpatient and home health care
• Part B: Covers doctor visits for diagnosis and treatment, medical equipment, and outpatient care
• Parts A and B combined: Known as traditional or Original Medicare
• Part C (Medicare Advantage): Managed care alternative to traditional Medicare
  • Offered by private health insurance companies through health maintenance organizations or preferred provider organizations
• Part D: Offers prescription drug coverage; provided by private health insurance companies

A Difficult Choice?

When helping clients navigate their Medicare options, you weigh how each plan’s features and costs match with the client’s health and lifestyle. Seniors can obtain comprehensive health care coverage by enrolling in Medicare Parts A, B, and D as needed, and perhaps adding Medigap coverage. So, often, the decision was an obvious “no” to the costs of a Medicare Advantage plan, especially for individuals who spend part of the year outside a plan’s coverage network.

Still, Medicare Advantage has also been considered an attractive choice by many. These plans cover everything that traditional Medicare covers and often include health-related supplemental benefits such as dental and vision care and subsidies for gym memberships. How popular are Medicare Advantage plans? According to the “Medicare Advantage 2020 Spotlight: First Look,” published by the Kaiser Family Foundation, approximately 34 percent of Medicare beneficiaries enroll in a Medicare Advantage plan, and approximately 97 percent of beneficiaries in Medicare Advantage plans use the supplemental benefits.  

What’s New?

In a press release on April 1, 2019, CMS announced the following expanded Medicare Advantage benefits:

• Expanded definition of supplemental benefits. Prior to 2019, CMS interpreted health-related benefits as those that would “prevent, cure, or diminish an illness or injury.” In 2020, an expanded definition of this term will include benefits for the daily maintenance of health. Specifically, the new definition applies to benefits that “diagnose, compensate for physical impairments, diminish the impact of injuries or health conditions, and/or reduce avoidable emergency room utilization.” For example, Medicare Advantage plans could cover adult day care, in-home personal care attendants, family caregivers, and home safety devices, as well as massage therapy for pain management. In a series of reports, the AARP Public Policy Institute is monitoring the effect of these changes.
• CHRONIC Care Act. In 2020, the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017 will allow Medicare Advantage plans to offer new benefits to chronically ill enrollees. Insurers can develop targeted benefits for long-term conditions such as diabetes or asthma. In addition, new benefits may include nonmedical services that address the social determinants of health, such as nutrition, housing, and education. These services should have a reasonable expectation of improving or maintaining enrollees’ health or overall function. CMS cited home meal delivery and transportation to a doctor as examples of expanded benefits that will be available to enrollees with chronic illnesses.

How Will Expanded Benefits Work?

Together, CMS’s new regulations and the CHRONIC Care Act create three categories of Medicare Advantage supplemental benefits:

1. Standard: Offering health-related benefits to all enrollees
2. Targeted: Offering health-related benefits to enrollees with a specific medical condition
3. Chronic: Offering benefits that are not necessarily health-related to enrollees with a chronic condition

In a study cited by an article in Home Health Care News, Milliman, an actuarial consulting firm, estimated that approximately 364 Medicare Advantage plans will expand their supplemental benefits. Of these plans, Milliman estimated that, at the least, 64 will cover adult day care, 58 will cover home-based palliative care, and 148 will cover in-home support services.

A Positive Development

The expansion of supplemental benefits is a positive development for Medicare enrollees. The expectation is that focused benefits will result in healthier outcomes for enrollees, but please be aware that this program is an experiment. Because 2020 is the first year for expanded Medicare Advantage benefits, many health care analysts are cautious about the probability of their success. It will be several years before enough data is collected to allow us to understand how the changes to Medicare Advantage benefits will affect retirement health care costs.

What strategies do you use to calculate future health care costs? How do you think that the expanded Medicare benefits will affect your planning solutions? Please share your thoughts below!