One of the largest health care acts in American history, commonly referred to as the Medicare and Medicaid Act, was approved by President Lyndon B. Johnson in July 1965. Both Medicare and Medicaid are actually subtitles to the overall Social Security Amendments of 1965.

PORTLAND — The year was 1965. The insurance industry was battling President Lyndon Johnson over the bill that would create Medicare, a national health care system for senior citizens.

The industry took a drubbing. Medicare became the law of the land and was hailed as a landmark legislative achievement.

Nearly 60 years later, insurers have learned to love Medicare. Far from an existential threat, it has become a reliable gravy train.

Customers are flocking to so-called Medicare Advantage plans — essentially reformulated, repackaged versions of Medicare supplemental plans.

During the most recent Medicare open enrollment, which began Sunday, Oct. 15, and runs through Dec. 7, seniors and others eligible for Medicare are able to choose from a bewildering number of options, most of them Medicare Advantage plans offered not by the federal government but by

private insurance companies.

For the first time in Medicare’s existence, more Americans bought Medicare Advantage plans in 2023 than opted to participate in traditional Medicare. After two decades of steady growth, 30 million people bought a Medicare Advantage plan in 2023. That’s about 51% of the total Medicare population, according to the Kaiser Family Foundation.

The ascent of Medicare Advantage plans has not always been smooth. Insurers have been accused of rejecting legitimate medical claims by its customers, charging large deductibles and copays, and making false and confusing statements in marketing materials.

“Every time you turn on the TV, you see these former celebrities trying to sell you something that almost always is untrue,” said U.S. Sen. Ron Wyden, D-Oregon, a vocal critic of aggressive and inaccurate Medicare Advantage marketing. “I see the benefits of a marketplace. But the marketplace has to be above-board.”

Some doctors and hospitals are not happy either. A handful of clinics in Southern California, and more recently a hospital in Oregon, said they would no longer do business with Medicare Advantage insurance companies. The reimbursements paid by the companies are just too small and their influence on customer treatment too large, they say.

Insurers, meanwhile, are getting paid prodigious sums of money by the federal government. In 2022, the Center for Medicare & Medicaid Services paid $460 billion to insurers that offer Medicaid Advantage. That number has been increasing by $40 billion to $50 billion annually in recent years.

The Medicare alphabet

A basic understanding of Medicare’s business model will help consumers make better decisions during open enrollment, experts said.

Medicare is an insurance program offered through the federal government that covers medical services and hospital care for people 65 or older, as well as younger people with certain disabilities. Medicare is made up of parts A through D.

Part A covers hospitalization. There is no premium for most people who paid Medicare taxes while working.

Part B covers doctor visits and other outpatient health care. It costs $164.90 a month, or more if you’re higher-income. Parts A and B are often referred to as original or traditional Medicare.

Part C includes the Medicare Advantage plans.

Part D is the prescription drug benefit. It’s optional, but it can cost more if you enroll later.

Advantages in advantage?

The Medicare Advantage alternative became available after 2003 legislation. Participation rates in the private-sector plans started small but have picked up momentum. This year, Medicare Advantage participation in New Jersey was 43% of the eligible population. At 60%, Michigan boasts one of the highest Medicare Advantage rates in the country. Oregon is at 57%.

It’s not hard to see why. Plans can be dirt cheap — it’s common for insurers to charge no premium at all, relying instead on government reimbursements. And yet, many Medicare Advantage plans offer prescription drug coverage, dental, vision and other services that traditional Medicare does not.

It all sounds too good to be true.

“We get that all the time, our customers ask us, what’s the catch? This has got to be a scam,” said Odet Aran, founder of Connie Health, a Boston-area health insurance brokerage. “We tell them, the plans are real, and many of them are phenomenal.”

Other brokers are more skeptical.

Elma Friend, founder of Willamette Valley Advisors, a health insurance brokerage in Milwaukie, calls this “a golden era for consumers.” But she wonders about the long-term viability of the Medicare Advantage business model.

“When you don’t have a premium and then you get all these great benefits … I just worry that it’s not sustainable,” she said. “The bubble has to pop.”

Options abound

There is no shortage of plans. The Kaiser Family Foundation reports there are nearly 4,000 Medicare Advantage Plans nationwide this year, an all-time high. Oregonians had 124 different Advantage Plans to choose from in 2023. The average monthly premium in the state was $33.74.

With that many competitors, it’s truly a buyer’s market. In addition to low or no premiums, insurers are offering all sorts of bells and whistles to set themselves apart.

Waltham, Massachusetts-based Devoted Health, for example, which started operations in Oregon early this year, says it assigns every customer a “guide” who will get to know them, advise them about medical care and advocate for them.

Other plans cover alternative medicine like chiropractic and acupuncture. Some will buy you a bag of groceries and deliver it to your house.

How to choose

Industry insiders suggested that one of the first steps in a customer’s due diligence should be the rating from the Centers for Medicare & Medicaid Services, or CMS. Each year, the federal agency rates insurance plans from one to five stars. CMS considers any plan with a 4-star rating or more to be an above-average plan.

On the other end of the scale, if CMS gives a plan fewer than three stars for three years in a row, that plan will be flagged as low performing. If you’re enrolled in a low-performing plan, CMS will contact you directly so you can start considering other options.

“The ratings are real. There are 40 different metrics they use,” said Brent Hess, director of government sales at Regence BlueCross BlueShield.

Consumers can find other valuable information on the Medicare.gov website, including a list of enforcement actions CMS has taken against insurers for a variety of transgressions.

Consumers should also ask about a plan’s network of caregivers. From San Diego to Oklahoma City to Bend, some clinics and hospitals are refusing to do business with certain insurance companies. The typical sticking point is money. Hospital officials contend the insurers don’t pay enough to cover the hospital’s costs.

St. Charles Health, a four-hospital chain in Bend, announced this month that it would no longer do business with Medicare Advantage plans from Humana and Health Net/WellCare in 2024. The change will impact about 6,000 people.

Some doctors argue that the insurers are hurting patients.

Dr. Mark Hallett, St. Charles’ chief clinical officer, recalled a patient with prostate cancer who was extremely anxious about whether the cancer had spread. The hospital had to wait three days to even administer the test because it needed pre-approval from the patient’s Medicare Advantage plan.

“This kind of thing is going on every day,” Hallett said.