Think ACA enrollment is complicated? Try Medicare

One of the early and persistent raps against the ACA is that the benefit structure and application process are too complex. There's a lot of questions to answer. It takes a half hour to an hour -- if you're not called on to provide extra verification for your identity or immigration status or income. There are benefit cliffs -- between Medicaid and the marketplace; between marketplace enrollees who qualify for strong Cost Sharing Reduction and those who don't; and, most precipitous (for older enrollees), between those who qualify for premium subsidies and those who don't. As for plan offerings, in some markets a dominant insurer will throw up a half-dozen minutely differentiated plans, sowing confusion.

All this is true. But I'd like to take a first pass here at a myth that I'd like to explore more fully later: that by comparison, Medicare is a blessed zone of simplicity, equity and benefit adequacy.


Medicare is more generously subsidized than the ACA marketplace  (on average; not for everyone), and subsidized further up the income chain. It insures far more people -- 57 million, about a sixth of whom are below age 65, compared to about 10 million in the ACA marketplace and about 17 million in the ACA-compliant individual market as a whole. It covers "everybody" over age 65, except for noncitizens who have worked in the country for less than five years (some of whom are actually eligible for cheaper and more comprehensive coverage in the ACA marketplace).

But Medicare too is a complex, gap-ridden tangle of benefits and public-private markets. In practice, it's a three-tier system, or maybe a four- or five-tiered system, with tiers corresponding roughly but by no means entirely to income:

1. There are about 10.7 million "dual eligibles*," who have some or all of their premiums and out-of-pocket costs picked up by ABD (Aged/Blind/Disabled) Medicaid and/or Medicaid-linked programs (Medicare Savings Programs, aka MSPs) or other programs (e.g. Extra Help with prescription drugs). The income eligibility cutoff for ABD Medicaid -- full Medicaid benefits -- is generally 87% of the Federal Poverty Level (FPL). MSP income thresholds are higher -- 100% FPL for the strongest benefit, 120% FPL for the next-strongest -- but all are subject to an asset test that excludes many people of limited means. Many beneficiaries of the ACA Medicaid expansion, which has an income threshold of 138% FPL and no asset test, face a "Medicare cliff" when they turn 65. That is, unless they connect with an MSP, they're faced with about $170 in monthly premiums and large out-of-pocket costs that were previously covered by Medicaid.


2. Millions of Americans** qualify for MSPs but don't access them because outreach is underfunded and haphazard and application is a difficult, labor-intensive process -- sometimes requiring "a wheelbarrow full of documentation," as Josh Schultz, a consultant at the Lewin Group who worked a stint at the Medicare Rights Center, puts it. 


3. For those of limited means who nevertheless exceed the minimal asset test threshold for these programs (a mere $7.4k in addition to a home or car), Medicare Advantage plans may function as a de facto discount program, in which enrollees trade off somewhat lower premiums (e.g., drug plan premium often included), an annual cap on out-of-pocket costs, and in some cases extra services such as hearing, vision and/or dental coverage for a limited choice of doctors and hospitals. About 19 million people are in MA plans, about 1/3 of all Medicare enrollees. Not all MA programs limit networks, but most do, many severely.


4. For the unwary or those with high risk tolerance, there's straight traditional Medicare, which leaves them with large out-of-pocket cost exposure. Medicare Part A, hospital coverage, has a $1340 deductible, after which there's no charge for a 60-day hospital stay. For days 61-90, however, enrollees pay $335 per day, and after day 90, $670 per day. Part B, mainly physician coverage, covers 80% of costs. Part D, prescription drugs, is designed to cover about 75% of drug costs, via a complex and gap ridden formula*** that can leave enrollees many paying thousands per year.


5. For the relatively affluent (or those who know they have extensive medical needs), Medigap policies can pick up close to all out-of-pocket costs and an unlimited choice of providers. Medigap premiums in my zip code (07079, NJ) run from about $100-300 per month (on top of Medicare Part B and D premiums), with cheaper high deductible options.  Coupled with Part B and Part D premiums, I know my parents and in-laws pay about $400 a month each for comprehensive coverage in Connecticut and New Jersey, respectively. About 12 million people are in Medigap plans

Two weak links in the system stand outto me. The first is poor outreach and a difficult enrollment process (varying considerably by state) for MSP programs. According to Leslie Fried of the National Council on Aging, only about half of the people eligible for MSPs are enrolled. I'm not sure if that's true as well for seniors eligible for ABD Medicaid [checking...], but most of them are also in MSP programs, so it seems clear that millions who are eligible are not enrolled. The federal government funds State Health Insurance Assistance Programs (SHIP), but the funding is inadequate and at risk. As for communication directly from Medicare -- inevitably,  "people who are enrolled throw it away all the time," says Mina Schultz, an ACA enrollment counselor with GetCoveredNYC, who spends a lot of time on the phone with people who don't absorb information they've been sent. For those who do realize they may be eligible for help with Medicare costs, as Josh Schultz (no relations) recounts, the application process is often an ordeal:

when people in many states turn 65 or otherwise qualify for Medicare, they effectively move back into the pre-ACA “dark ages” when Medicaid program applicants sometimes had to bring a “wheelbarrow full” of documentation to their local social services office, and wait through interview processes and hours-long lines, in order to apply and be considered for coverage

The second weak link is for those who are shut out of MSPs and ABD Medicaid by the very low allowable assets -- say, a couple with an income in the $30,000 range and $20,000 in a 401k. The federal government does pay about 85% of the combined premiums for Medicare Parts A, B, and D, which collectively have an actuarial value a bit north of 80%. But that leaves the couple paying about $170 per month each for coverage that can saddle them with many thousands in out-of-pocket costs. Medicare Advantage plans can reduce those premiums somewhat (though on average, plans don't) and cap OOP liability, effectively providing the catastrophic coverage that traditional Medicare lacks. But the cost burden is heavy for many families. A recent Kaiser Family Foundation/Urban Institute study published last month found that 36% of beneficiaries in traditional Medicare spent at least 20% of their total income on OOP in 2013.

At any income level, Medicare enrollment and decision processes are anything but simple. Medigap plan designs are standardized, but there are 10 standard designs. Medicare Advantage plans offer tradeoffs of benefits and network adequacy at least as complex as the ACA marketplace.
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* Not all dual eligibles are over 65. According to the 2017 MACPAC report, 6.8 million Medicaid enrollees are over 65. The others are enrolled in disability Medicare.

** In a presentation at Health Access 2018 in Jan. 2018, Leslie Fried of the National Council on Aging cited data indicating that fewer than half of people eligible for MSPs participated. Since about 85% of the dual eligibles listed in the latest "dual eligible snapshot", available from CMS here, are in MSPs, I infer that the takeup is roughly the same for dual eligibles as a whole.

*** Here is the Kaiser Family Foundation's summary of the standard Part D benefit:

In 2017, the Part D standard benefit has a $400 deductible and 25% coinsurance up to an initial coverage limit of $3,700 in total drug costs, followed by a coverage gap. During the gap, enrollees are responsible for a larger share of their total drug costs than in the initial coverage period, until their total out-of-pocket spending in 2017 reaches $4,950...After enrollees reach the catastrophic coverage threshold, Medicare pays for most (80%) of their drug costs, plans pay 15%, and enrollees pay either 5% of total drug costs or $3.30/$8.25 for each generic and brand-name drug, respectively. The standard benefit amounts are indexed to change annually by rate of Part D per capita spending growth, and, with the exception of 2014, have increased each year since 2006.