This Proposal Could Spell Disaster for Your Medicare

Sometimes things change for the better, and sometimes they change for the worse. With some changes, it can be hard to tell if they're good or bad. Here's a look at a proposed change for Medicare -- one that I think is very problematic.

The proposal comes from the Trump administration, and it's also present in the conservative Project 2025 policy roadmap. It suggests that when people become eligible to enroll in Medicare, they would be automatically enrolled in a Medicare Advantage plan.

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Medicare basics

Here's a quick review of Medicare: It's a health insurance program run by the U.S. government. It's currently for those 65 and older, though some younger people with certain conditions can also qualify for it.

You can enroll in Medicare as you approach age 65. When you do so, you get to opt for either "original" Medicare, which features Part A (hospital coverage) and Part B (physician/medical insurance), or a Medicare Advantage plan, sometimes referred to as Part C. Medicare Advantage plans are offered by private insurance companies and are required to provide at least as much coverage as original Medicare. Most plans offer more, such as vision, dental, and hearing coverage.

Those who sign up for original Medicare typically add Part D, which covers prescription drugs, and they'll often add a "Medigap" supplemental coverage plan.

There are pros and cons for both original Medicare and Medicare Advantage plans. For example, original Medicare is accepted by most doctors across the country, while Medicare Advantage plans are generally closed networks of providers and facilities. Medicare Advantage plans cap out-of-pocket spending, but they sometimes deny prior authorization requests.

Is the proposal good or bad?

The proposal to automatically enroll people in Medicare Advantage plans has me worried. My cynical side notes that this will probably deliver more customers to insurance companies, for example.

I will concede that it's good to automatically enroll people in Medicare, so that they can avoid the very steep penalty levied for enrolling late. That penalty adds 10% to the cost of your premiums for each year that you're late -- for the rest of your life. Enroll four years late and you may face a permanent 40% surcharge.

So while automatic enrollment has an upside, note that people could be automatically enrolled in original Medicare instead. That seems better to me.

Those defending the proposal might point out that people can switch between original Medicare and Medicare Advantage plans annually, but there is a big risk if you don't initially enroll in original Medicare: If you switch into it later, you may not be allowed to sign up for a Medigap plan, or you may have to pay much more for it.

Defenders may also note that people could always opt out of this default enrollment. That may be true, but not everyone will be aware of this possibility.

Overall, to me, this doesn't seem like a great idea. You may think differently, of course. And if you feel strongly about this proposal, you might want to let your representatives in Washington know.

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