Dermatology at a 'disadvantage'

By Emily Margosian, Assistant Editor, December 1, 2024

Over 67 million people in the United States receive health care coverage through Medicare.

However, a growing number have begun to defect in favor of an increasingly popular plan choice: Medicare Advantage. While Medicare Advantage has existed since the early 2000s, over the last decade its popularity has eclipsed that of traditional Medicare, with more than half of Medicare-eligible enrollees opting for an Advantage plan.

With such a seismic shift in coverage underway, what are the implications for dermatologists and their patients? This month, experts break down network adequacy, administrative burden, and reimbursement associated with Medicare Advantage plans, and dig into what’s driving the rapid growth in their enrollment.

The ABCs of Medicare

What is Medicare Advantage? Many physicians are familiar with the four parts of Medicare. Part A involves hospital insurance, Part B involves medical insurance, and Part D involves Medicare drug insurance. Medicare Advantage is known as “Part C.”

Medicare-eligible participants have the option to choose between “traditional Medicare,” also sometimes referred to as “original Medicare,” and Medicare Advantage plans. Medicare Advantage plans are offered by private health insurance companies who receive payments from the federal government to provide Medicare-covered services in addition to extra benefits that traditional Medicare does not offer.

“There can be a lot of confusion about the differences between the two,” according to Louis A. Terranova, AADA associate director of practice and payment policy. “Traditional Medicare is run by CMS, whereas Medicare Advantage plans are managed and offered by private insurers who have a contract with CMS. The big difference is that while Medicare Advantage plans must offer coverage that’s comparable to traditional Medicare, they can go beyond that. They have a ‘floor,’ so to speak, where the benefits must remain the same. However, traditional Medicare does not include coverage for prescription drugs, dental, or vision, while Medicare Advantage plans may offer those additional benefits if they so choose.”

In addition to plan structure, there are also important differences in reimbursement for Medicare Advantage plans. “With traditional Medicare, payment for services is based on the Medicare physician fee schedule. Medicare Advantage plans don’t have to follow the same fee schedule, because they accept more financial risk,” explained Terranova. “A physician practice that accepts traditional Medicare is called a ‘participating provider,’ and they’re paid at the Medicare rate. If they become a Medicare Advantage provider, then those rates are negotiated with the health plan.”

Why is enrollment growing?

For the past two decades, Medicare Advantage enrollment has been on a steady climb. Starting in 2003, the Medicare Modernization Act created stronger financial incentives for plans to participate in the program and renamed private Medicare plans “Medicare Advantage.”

As of 2023, for the first time in Medicare’s history, more than half of all Medicare-eligible beneficiaries were in a Medicare Advantage plan as opposed to traditional Medicare.

Sandy Johnson, MD, FAAD, member of the AADA’s Patient Access and Payer Relations Committee, has seen this growth first-hand. “I’m in private practice in Fort Smith, Arkansas. I have seen a significant rise in patients covered by Medicare Advantage. It was a steady uptick for several years. However, in the past few months it has sharply increased.”

According to CMS, Medicare Advantage enrollment has more than doubled since 2010 and is projected to grow from at least 54% of the eligible population in 2024 to 60% by the end of this decade.

So, what’s driving the boom? Growth in enrollment is attributed to several factors.

Additional benefits

According to Terranova, many people with Medicare Advantage are drawn to the program for the extra benefits. These can include perks like reduced cost-sharing, dental coverage, gym memberships, and debit cards for over-the-counter medical supplies that are not covered by traditional Medicare.

“I think the growth is due to a couple of things. Certainly, depending on the individual and what their needs are, Medicare Advantage may attract plan members who are seeking dental care, coverage for hearing aids, and exams. Vision care is another potential benefit, and even things like meal services and gym memberships are offered by some Medicare Advantage plans that would not be available under traditional Medicare.”

People with Medicare are drawn to MA plans that are marketed as “zero premium” products. Like traditional Medicare, enrollees are required to pay the Medicare Part B premium, but unlike beneficiaries in traditional Medicare, they typically do not pay a separate premium for additional coverage or for Part D prescription drug premiums because MA rebate dollars cover those costs.

Simplicity

Medicare-eligible beneficiaries may also be attracted to the convenience of Medicare Advantage, which provides coverage all in one plan. This eliminates the need to obtain a Part D plan and a Medigap plan, as many traditional Medicare beneficiaries have. Medicare Advantage also offers a degree of financial protection with a required annual out-of-pocket limit.

“There is the potential for lower out-of-pocket costs under Medicare Advantage plans,” said Terranova. “Under traditional Medicare, plan members will pay 20% of the cost of services. Sometimes, a plan member may have to purchase what’s called a Medigap plan to cover additional services that are not covered by traditional Medicare. With Medicare Advantage, plan members will have a limited co-insurance or set co-payment amount, so they have the potential for lower out-of-pocket costs. I do want to emphasize the word ‘potential’ — because it depends on what type of plan is selected, how sick the person is, and how often they utilize the benefits.”

Marketing

The rise in popularity of Medicare Advantage plans can also be attributed to aggressive marketing by insurers. During the 2023 open enrollment period, there were more than 9,500 TV ads for Medicare Advantage per day, whereas traditional Medicare does not market the same way.

“From October to December when they have open enrollment, there will be a lot of ads promoting Medicare Advantage,” said Terranova. “It has gotten so bad, that in 2022, following reports from Medicare advocates including state insurance commissioners, the Senate launched an inquiry into potentially deceptive marketing tactics by Medicare Advantage plans.”

Following the 2023 enrollment period, CMS issued new rules regulating the marketing practices of Medicare Advantage plans. “Now, CMS has to approve all television ads in advance, among other things,” according to Terranova. “This was in response to the very aggressive marketing that’s taken place over the past few years to promote Medicare Advantage by these private insurance plans.”

Financial incentive for insurers and employers

While beneficiaries may be swayed to enroll in a Medicare Advantage plan for the extra benefits or as the result of persuasive marketing, the financial incentives for insurers and employers are also a key enrollment driver.

A growing share of large employers are shifting their Medicare-age retirees into MA plans for both Medicare and supplemental benefits as a strategy to maintain benefits, simplify administration, and lower their own costs. “Many patients, including my own parents, are enticed to a Medicare Advantage plan because their prior employer will cover the insurance premiums, and they are allotted a $350 allowance for over-the-counter products including bandages and acetaminophen,” said Dr. Johnson.

“Many patients, including my own parents, are enticed to a Medicare Advantage plan because their prior employer will cover the insurance premiums, and they are allotted a $350 allowance for over-the-counter products including bandages and acetaminophen.”

Insurance brokers also have a financial incentive to encourage enrollment in Medicare Advantage plans because commissions are higher than for Medigap and Part D plans purchased to complement traditional Medicare. “A Medicare Advantage plan is more comprehensive. For example, Medicare Part D is limited to just prescription drug coverage. If you buy any type of insurance plan that’s limited in scope, it’s going to be cheaper. Whereas with Medicare Advantage, with all their comprehensive benefits, the premiums are going to be higher, so that’s where brokers are incentivized to push Medicare Advantage plans,” explained Terranova. “Due to that higher premium, they get a larger commission. A lot of benefit consultants, depending on how their commissions are structured, would tend to promote Medicare Advantage plans over traditional Medicare supplemented with a Medigap or Part D policy, just because those latter two have a limited, more focused scope of benefits. Less premium equals less commission.”

Impact on dermatologic care

As an increasingly growing number of Medicare-eligible beneficiaries opt for Medicare Advantage plans, how have dermatology practices and their patients been impacted?

Payment

“Most Medicare Advantage plans are offered by private health insurers such as Anthem, Cigna, Humana, and UnitedHealthCare. It’s generally true that private payers will follow Medicare’s lead regarding reimbursement,” said Terranova. “However, under Medicare Advantage, they have greater leeway in terms of negotiating fees. With traditional Medicare, dermatologists are reimbursed under the Medicare fee schedule. Commercial insurers who offer Medicare Advantage have greater latitude in following that schedule.”

Network adequacy

Specialists have increasingly voiced that access to care is a significant limitation of Medicare Advantage plans, citing reports that plans operate overly narrow networks with inadequate access to specialists, leading beneficiaries to disenroll at high rates, particularly in their last year of life (JAMA Netw Open. 2024;7(7):e2424096).

“Under some Medicare Advantage plans that are HMOs, there is a gatekeeper, and you need a referral to see a specialist like a dermatologist,” said Terranova. “We have also heard from members in certain geographic areas that the Medicare Advantage plan will close their network. Meaning that they’re not accepting new providers, or when it comes to contract time, they will drop providers, including physician practices and dermatologists because they’ll say, ‘Well, our network is full.’ That’s another potential access issue as well.”

For Dr. Johnson, the issue of narrow networks has hit close to home. “My parents, as well as their friends, have found out that when they need a referral to see a specialist, there is no specialist within easy driving distance who accepts their Medicare Advantage plan. Likewise, the local hospital does not accept their Medicare Advantage plans.”

According to Dr. Johnson, this change in coverage can cause significant confusion for patients. “Many patients do not realize they are now part of a Medicare Advantage plan and still present their Medicare card,” she explained. “When Medicare denies payment, the patient is confused. We often have trouble finding the Medicare Advantage ID for a patient and so we cannot bill the Medicare Advantage plan for the patient. Often these patients are really confused and feel overwhelmed.”

Administrative burden

As the number of Medicare Advantage enrollees has soared, physicians must contend with a growing number of policies and regulations, which have become more complex and variable over time.

“Anecdotally, physicians have indicated that administrative burden in the form of records requests and prior authorizations are more prevalent with Medicare Advantage plans,” said Terranova.

“As more patients are covered under Medicare Advantage, particularly if growth continues at this rapid rate, it will only compound the administrative burden placed on physicians for prior authorizations and records requests.”

As the number of her patients covered by Medicare Advantage has grown, Dr. Johnson has seen this play out in her own practice. “Medicare Advantage plans may require utilization review for certain services that traditional Medicare does not require. For example, we have to get prior approval for various procedures and medications for Medicare Advantage plans but not for traditional Medicare,” she explained. “Certain Medicare Advantage plans also request records for services for pre- or post-payment review.”

According to Terranova, Medicare Advantage plans require more documentation because of the way they are reimbursed by CMS. “Medicare Advantage plans are paid by CMS on a capitated basis. It’s risk-based, meaning that the sicker the plan member, the higher the rate of payment from CMS to the Medicare Advantage plan,” he explained. “As a result, Medicare Advantage plans put pressure on physicians to provide additional reporting to support higher levels of severity in terms of patient sickness. For example, we hear from members who are being asked to provide copies of their patient’s medical records for the health plan to go through to justify a higher level of payment from CMS. Additionally, from a cost-containment aspect, they often implement utilization management programs in the form of prior authorization or step therapy. This creates another potential burden to physician practices.”

Looking ahead

As growth in Medicare Advantage continues, regulators and advocates are taking note. “The Patient Access and Payer Relations Committee and other Academy groups are being proactive in educating and advocating for us, particularly as the commercialization of Medicare with Medicare Advantage plans continues to increase,” said Dr. Johnson.

According to Terranova, the Academy is working with CMS to address concerns with Medicare Advantage. “As more patients are covered under Medicare Advantage, particularly if growth continues at this rapid rate, it will only compound the administrative burden placed on physicians for prior authorizations and records requests. CMS has already stepped in to better regulate advertising, and as the result of the Academy and others’ advocacy efforts, CMS reformed Medicare Advantage’s use of prior authorization.” For example, in early 2024, CMS released a rule incorporating many of the Academy’s recommendations, including shorter deadlines for MA plans to respond to prior authorization requests, and increased transparency of MA plans’ use of prior authorization. This will take effect in 2026. “Nevertheless, the Academy continues to push CMS on many of these issues with MA plans, so we hope to see more changes soon that will rein in many of these practices.”

Additional DermWorld Resources