California Healthcare Provider’s Move Highlights Pitfalls of Medicare Advantage

By Mark Miller

Many Medicare beneficiaries tend to overlook the program’s annual enrollment period, often opting to ignore the complexities involved. However, for thousands of seniors in San Diego, California, this year’s Medicare enrollment has turned into a challenging race to secure new insurance or healthcare providers.

In September, Scripps Health, a significant healthcare provider in Southern California, announced that starting next year, its popular clinic and coastal medical groups will no longer accept patients enrolled in Medicare Advantage—a managed-care alternative to traditional Medicare offered by private insurers. This decision affects 32,000 seniors in San Diego, who are now faced with the urgent task of finding new healthcare options or insurance plans for 2024.

Disabled individuals who qualify for Medicare before the age of 65 are also impacted. Scripps is not alone in this; several other health systems across the country are also terminating their Medicare Advantage contracts.

The annual enrollment period for Medicare is currently underway and will conclude on December 7. For those enrolled in traditional Medicare (Parts A and B) with a Medigap policy, there is typically no need to reassess that coverage. However, reviewing Part D prescription drug plans or Medicare Advantage plans is advisable. This period is also the opportunity to shift between Advantage and traditional Medicare.

The popularity of Medicare Advantage has surged in the past decade, thanks in part to its comprehensive features and lower upfront costs. Most Advantage plans include prescription drug coverage, and they do not work in tandem with supplemental Medigap policies, which can lead to high out-of-pocket expenses. Like all Medicare beneficiaries, individuals enrolled in Advantage still pay their Part B premium and are responsible for out-of-pocket costs up to a predetermined annual limit.

Nonetheless, the recent decision by Scripps Health highlights a significant downside to Medicare Advantage: the risk of losing access to preferred doctors and hospitals. Providers may be dropped from Advantage networks if contract negotiations between insurers and healthcare systems fail.

Scripps’ announcement represents a notable trend: healthcare systems choosing to exit Medicare Advantage. This inherent instability within provider networks indicates that the decision between traditional Medicare and Advantage involves more than financial considerations; it is also crucial for both health and quality of life.

In a recent conversation, Scripps Health CEO Chris Van Gorder explained that the organization is projected to lose over $75 million on care provided to Medicare Advantage patients this year. He attributed the decision to two primary factors: the low rates offered by insurers and the tendency of sicker patients to seek care at premier medical facilities like those operated by Scripps.

Van Gorder added that Scripps has been burdened by the administrative complexities of Medicare Advantage’s prior authorization processes, where insurance companies determine coverage for prescribed services, treatments, or medications.

“This is probably the most challenging decision I have made in my role here,” he remarked. “I’m in the patient care business, not the insurance or cancellation business.”

According to Sophie Exdell, program manager for the San Diego area’s Health Insurance Counseling and Advocacy Program (HICAP), many seniors are now desperately seeking solutions. HICAP, funded by both federal and state governments, offers free and unbiased assistance with Medicare across the nation.

“We’re receiving numerous calls from individuals trying to figure out their next steps,” said Exdell. “A common concern is from those in the midst of treatment who want to continue seeing their current doctors.”

Scripps patients essentially have two options: either switch their healthcare provider or alter their insurance coverage.

During the annual enrollment period, it is feasible to transition from Medicare Advantage to traditional, fee-for-service Medicare. However, traditional Medicare does not include an annual out-of-pocket spending limit, which means patients might face substantial co-pays and deductibles. Many individuals mitigate these coverage gaps by purchasing Medigap supplemental policies, but there can be challenges associated with moving from an Advantage plan to traditional Medicare.

The optimal time to acquire a Medigap policy is during the initial enrollment period for Medicare Part B, during which individuals have a “guaranteed issue” window that prevents Medigap plans from denying coverage due to pre-existing conditions. Some states offer varying protections that allow for later enrollment with pre-existing condition safeguards.

In California, one insurer is currently offering some plans to all applicants, providing a limited “underwriting holiday” that does not factor in health status.

However, switching to Medigap can result in higher upfront premium costs. For those in San Diego opting for a Medigap G plan, annual premiums can range from about $2,500 at age 70 to $4,200 at age 80, according to HICAP.

Some patients are considering changing healthcare providers, but even then, they must navigate a crowded market of over 90 Advantage plans available next year.

“It’s a very complex landscape of options,” Exdell noted.