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In my multiple writings on the Medicare Advantage scam, the most common two responses I get (besides, “Thanks, you may have saved my life!”) are, “I’ve never had a problem with my Advantage plan,” and “If it’s so bad, how come so few people are saying so?”

Both are honest, good-faith questions and highlight how easy it is for insurance companies to get away with their Medicare Advantage scams. The answer to both boils down to the unique nature of insurance being the only “product” we buy where we have no idea if it’s any good until something bad happens — which can take years.

Every state in the union has an insurance commissioner. But why?

Why would any state go to the trouble and expense of creating a new layer of bureaucracy?

We don’t have “auto dealership commissioners” or “big-box retailer commissioners”: only insurance has an elected or appointed overseer.

Why would a state want to elect or appoint a very well-paid person to a new position in state government? Why would they appropriate money for a staff, for offices, in some cases even for buildings for a state insurance commissioner?

It turns out the answer is quite simple. One of the easiest scams in the history of scams, going all the way back centuries before Alfred Ponzi set up shop in Pie Alley, is done with insurance.

Here’s how it works.

If you have insurance, you send them a check every month. You think you’re covered and they’ll be there for you when you need them.

But you have no way of knowing if they’ll really be there for you when you need them because you’ve never used the service in a real health crisis.

It’s completely different from going to the store and buying a toaster. When you get home, you plug it in, and you know right away if it works or not.

Insurance, on the other hand, is the only “product” in existence where you buy it but have no idea if it really works and will be there for you until years later when you need it — and then it’s too late to do anything about it.

Because of this, thousands of insurance schemes and scams were run across the United States, particularly during the late 19th and early 20th century.

In almost every case they sold policies but after a year or two simply closed up shop and moved to some other town taking all the money with them.

If it was life insurance, nobody had died during that time. If it was home fire insurance, nobody’s house caught on fire. If it was theft insurance, nobody who was insured got robbed.

And even if somebody did have a claim in one of those categories, paying it would’ve been a relatively small expense relative to all the money that had been collected before they fled the state.

Insurance was such an easy and lucrative way to commit fraud that state after state decided that anybody selling it would have to be licensed and there would have to be an entire level of state bureaucracy to make sure that the insurance companies weren’t ripping people off.

Medicare advantage or Medicare part C has now become a variation on that kind of 19th century scam, as I document in detail in The Hidden History of American Healthcare: Why Sickness Bankrupts You and Makes Others Insanely Rich.

This privatized insurance deceptively sold under the Medicare name (thanks, George W. Bush) allows the corporations that sell it to challenge every single doctor’s recommendation, drug, procedure, or surgery, and also refuse to pay for doctors or hospitalizations that are “out of network.”

They get away with it because when people choose to sign up for Medicare Advantage at 65 they’re typically not sick. They have no idea all the hassles, hoops, and troubles they might have to jump through when they do get sick, have an accident, or otherwise need medical assistance.

And since the last three years of life are typically the most expensive years for healthcare, the insurance denials are more likely to happen then — long after the person’s signed up with the Advantage company.  

So it takes a few years for people to figure out how badly they got screwed by not going with regular Medicare but instead putting themselves in the hands of private insurance companies.

The New York Times did an exposé of the problem earlier this year, in an article titled “Medicare Advantage Plans Often Deny Needed Care, Federal Report Finds.” It tells the story of “Kurt Pauker, an 87-year-old Holocaust survivor in Indianapolis” who’d bought an Advantage policy from Humana:

“In spite of recommendations from Mr. Pauker’s doctors, his family said, Humana has repeatedly denied authorization for inpatient rehabilitation after hospitalization, saying at times he was too healthy and at times too ill to benefit.”

This is not at all uncommon, the Times notes:

“Tens of millions of denials are issued each year for both authorization and reimbursements, and audits of the private insurers show evidence of ‘widespread and persistent problems related to inappropriate denials of services and payment,’ the investigators found.”

If you have “real” Medicare with a heavily regulated Medigap policy to cover the 20% Medicare doesn’t, you never have to worry.

Your bills get paid, you can use any doctor or hospital in the country who takes Medicare, and neither Medicare nor your Medigap provider will ever try to collect from you or force you to pay for what you thought was covered.

Neither you or your doctor will ever have to do the “pre-authorization” dance with real Medicare: those terrible experiences are part of the past.

But if you have Medicare Advantage — which is not Medicare, but privatized insurance that came about because of George W. Bush’s 2003 law to privatize Medicare — you’re on your own.

As the Times laid out:

“About 18 percent of [Advantage] payments were denied despite meeting Medicare coverage rules, an estimated 1.5 million payments for all of 2019. In some cases, plans ignored prior authorizations or other documentation necessary to support the payment. These denials may delay or even prevent a Medicare Advantage beneficiary from getting needed care…”

Buying a Medicare Advantage policy is a leap in the dark, and the federal government generally is not there to catch you. And it’s all perfectly legal, thanks to Bush’s 2003 law, so your state insurance commissioner usually can’t or won’t help.

And don’t even bother fantasizing that Joe Namath or another of the well-paid hustlers will be there for you: they don’t even disclose in their TV ads that if you sign up for Advantage and hold the policy for more than a year it can be extraordinarily difficult to get back on “real” Medicare or buy a Medigap policy.

Forewarned is forearmed.

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