New Study Shows Medicare Advantage "Critical" For Low Income And Minority Beneficiaries; Saves Millions For Medicaid

September 20, 2005

WASHINGTON – A study released today shows the critical role the Medicare Advantage program plays in providing low-income and minority Medicare beneficiaries with access to health care, and in saving the Medicaid program millions of dollars.

The study, conducted by Kenneth Thorpe, professor and chair of the Department of Health Policy & Management, and Adam Atherly, Ph.D. at Emory University, examines who enrolls in Medicare Advantage, how Medicare Advantage affects Medicaid costs, and how enrollees would be affected if Medicare Advantage was not available.  The study was released at a briefing today at the Blue Cross and Blue Shield Association (BCBSA). 

“It is clear that low-income and minority populations rely heavily on the Medicare Advantage program,” said Thorpe.  “Because these programs are often affordable and include benefits not found in traditional Medicare, many with lower incomes depend on it.  In many cases, the same people enrolled in Medicare Advantage are actually eligible for Medicaid, so any loss of Medicare Advantage participation would likely result in increases in Medicaid costs.” 

The study, entitled Value of Medicare Advantage to Low-Income and Minority Medicare Beneficiaries, found that Medicare Advantage serves a high proportion of minority beneficiaries.  Forty percent of African American and 53 percent of Hispanic beneficiaries without Medicaid or employer coverage rely on Medicare Advantage, as compared with 33 percent of non-Hispanic, white beneficiaries.  When examining income level, the study shows that Medicare Advantage plans disproportionately cover low-income beneficiaries:  36 percent of Medicare eligible beneficiaries with incomes below $10,000 annually and 38 percent of those with incomes from $10,000 to $20,000 without Medicaid or employer coverage enroll in Medicare Advantage plans. 

In addition, the study found that Medicare Advantage lowers Medicaid costs significantly, providing comprehensive coverage to low-income “dual eligible” beneficiaries.  The authors found that nearly 18 percent of all those eligible for Medicaid enroll in a Medicare Advantage plan providing “substantial” savings to the Medicaid program.  Without Medicare Advantage, the study estimates that Medicaid costs would increase by $792 million annually and roughly $4 billion over 5 years. 

Additional findings of the study include:

• Medicare Advantage provides value to Medicare beneficiaries by providing more comprehensive benefits and more financial protection than traditional Medicare coverage.  "Medicare Advantage will provide Medicare beneficiaries $3 billion in supplemental benefits in 2005 at no cost to the beneficiary, or an annual average of $615 per Medicare Advantage enrollee, net of premiums paid by beneficiaries."
  
  
• Based on analysis of beneficiary purchasing of supplemental coverage, without Medicare Advantage, 2 million beneficiaries would lose supplemental coverage and would rely on Medicare alone for their healthcare coverage.  As a result, the percentage of Americans without any supplemental coverage would increase by 32 percent.  Ethnic minorities would be especially hard hit, as the number of African-Americans without any supplemental coverage would rise to 59 percent.

While the Medicare Advantage program is slated for expansion in 2006, Congress is currently debating possible funding cuts to the program. 

“As Congress debates potential cuts to Medicare and Medicaid funding, it is crucial that we understand how much people, especially minorities and those with low incomes, rely on these programs to provide affordable and comprehensive health benefits,” said Mary Nell Lehnhard, senior vice president, BCBSA.  “In addition, cuts to Medicare Advantage will likely only drive up costs for Medicaid.” 

The full study is available, along with more information, at: http://www.bcbs.com/issues/medicaid/research/value-of-medicare-advantage.html