Medicare private plan enrollment hits 12.8 million
■ Advantage plans have remained popular with seniors, but insurers warn that choices could be limited after health reform law cuts.
By Charles Fiegl amednews staff — Posted Feb. 13, 2012
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Washington -- Enrollment in private Medicare plans increased by 10% as average plan premiums have fallen by 7%, but health insurers are warning that patients will have fewer private coverage choices after insurance market mandates in the health system reform law take effect.
Recent federal data show 12.8 million patients, or 25% of the Medicare population, enrolled in a Medicare Advantage plan for 2012. The average monthly premium for these plans dropped to $31.54, from $33.97 in 2011.
"Not only are average premiums lower, but plans are better, with more beneficiaries enrolled in four- and five-star plans," Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner said on Feb. 1. "The Affordable Care Act has strengthened Medicare Advantage by motivating plans to improve the quality of their coverage."
The reform law had introduced new quality scores and bonus payments for plans that meet performance standards. But those bonuses are temporary, and other reform law provisions that will lower federal subsidies to Medicare Advantage plans have yet to take effect. That has insurance plans worried.
The 2010 health system reform law eventually will cut a total of $200 billion from Medicare Advantage during the next several years, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans. As a result, the Congressional Budget Office projects enrollment in these plans to drop by 4 million by 2019. This will lead to higher premiums for patients who remain in private plans, Zirkelbach said.
For now, the operating environment for Medicare Advantage plans is stable, said Dan Mendelson, president and CEO of Avalere Health, a health care policy analysis group in Washington. But stability is not the only reason for a big increase in enrollment and lower premiums. Overall spending in Medicare has slowed during the economic downturn.
Seniors are looking for lower out-of-pocket costs and predictability from Medicare Advantage, Mendelson said. Health plans have improved their brands and are recognizable to consumers. Patients also are more familiar with managed care from the insurance coverage provided to them by current or former employers.
"This reflects a shift from fee-for-service to managed care," Mendelson said. "That's a significant population of beneficiaries -- so large it becomes a constituency."
Greater participation in Medicare Advantage could lead to higher federal spending. Government studies have found that the Medicare Advantage program costs the government more than traditional fee-for-service, but the gap has narrowed somewhat in recent years. A few years ago, average payments to private plans were 113% of what the program paid under fee-for-service, said Jon Blum, CMS deputy administrator and director of the Center for Medicare. Today, it's roughly 107% of fee-for-service.
Critics of Medicare private plans say the insurers are still overpaid even after taking into account any additional benefits they may offer enrollees. Those critics also have said that federal quality bonuses have been made to some underperforming plans.
Reduced pay and other health system reforms affecting the Medicare Advantage market had caused concern from the reform law's opponents that plans and beneficiaries would lose interest in the program. Blum said that has not been the case.
"There are future changes that will be made to payment policy due to the law, but while payments are coming down, choices remain strong and beneficiaries continue to find good value from the plans," he said.
Part D benefits
Medicare patients also saved $2.1 billion on prescription drugs in 2011 because of reforms to the Part D drug benefit, HHS announced on Feb. 2. The reform law is closing the coverage gap, known as the "doughnut hole," that patients hit once $2,930 is spent on medications. Catastrophic coverage doesn't begin until $4,700 is spent.
The law will close the gap by 2020. Until then, patients hitting the gap receive discounts when purchasing medications. In 2012, beneficiaries will save 50% on brand-name drugs and 14% on generics.
In 2011, 3.6 million seniors hit the doughnut hole and saved an average of $604. Beneficiaries are expected to save an average of $4,200 between 2011 and 2021.
A statement prepared by Republican staff on the House Ways and Means Committee called the announcement misleading. The statement notes Part D premiums are expected to increase by 9% by 2019.