Medicare Advantage popularity may be short-lived

Insurers still offer beneficiaries competitive rates despite the upcoming $156 billion in cuts to the Medicare private plan program.

By Charles Fiegl amednews staff — Posted Oct. 1, 2012

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New data on the Medicare Advantage program show that enrollment by seniors in private plans continues to grow despite scheduled cuts to the program’s federal subsidies.

The Dept. of Health and Human Services estimates that premiums for Medicare Advantage plans will grow only slightly next year, according to projections released Sept. 19. Average monthly premiums are set to increase by only $1.47, or 4.7%, to $32.59 in 2013. As of Sept. 1, enrollment was up to 13.2 million enrollees and is expected to grow by 11% next year.

HHS Secretary Kathleen Sebelius credited reforms in the Affordable Care Act for continuing to strengthen private Medicare insurance plans and controlling premium growth. Overall Medicare Advantage premiums have fallen by 10% since the act was signed into law in 2010. About 27% of beneficiaries are enrolled in a Medicare Advantage plan.

But opponents of the reform law said the long-term prognosis for Medicare Advantage is uncertain, as the statute will cut $156 billion from the program over 10 years.

The House Ways and Means health subcommittee held a Sept. 21 hearing on the future of Medicare Advantage. The vast majority of the authorized reductions to the program have yet to be implemented, said Rep. Wally Herger (R, Calif.), the panel’s chair.

“Clearly, beneficiaries and health plans have not seen the full impact of these cuts,” Herger said in his opening statement. “Yet millions of seniors will be forced out of the plans they have and like once they are fully implemented.”

In addition, a premium tax under the Affordable Care Act will lead to higher cost-sharing for patients, as enrollees will pay an extra $220 in 2014, said Karen Ignagni, president and CEO of America’s Health Insurance Plans. Additional cuts detailed in the federal budget sequestration between 2013 and 2021 also would harm patient access to these plan options if Congress doesn’t overturn that budget control mechanism.

“These additional cuts — if they are implemented — could further disrupt coverage for Medicare Advantage beneficiaries and place a financial burden on providers participating in the program,” Ignagni said.

Herger recalled that many of his constituents in Northern California lost access to private plans in Medicare after similar budget cuts in 1997. After widespread abandonment of Medicare by private plans, Congress responded by adding more resources to woo back the insurers.

Republicans also have accused the Obama administration of temporarily boosting pay to insurers through they say is a bogus Medicare quality demonstration project that increases pay by $8.3 billion over three years. The Government Accountability Office has recommended that the program be shuttered, but administration officials have refused, saying the demonstration offers appropriate incentives for plans to improve quality.

Rep. Pete Stark (D, Calif.), the Ways and Means health panel’s top Democrat, accused his GOP colleagues of being alarmists on Medicare Advantage. He pointed to recent data from HHS showing that premiums have remained low and that enrollment has increased since enactment of the reform law. Furthermore, the Congressional Budget Office had predicted that enrollment would decrease to below 10 million beneficiaries by 2013, and that prediction has been proven wrong, Stark said.

CBO now projects that the number of Medicare Advantage enrollees will decrease to about 11 million by 2022.

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$156 billion cut will hit Medicare Advantage

The health system reform law establishes a new mechanism for setting payment rates in Medicare Advantage. America’s Health Insurance Plans warns that these reductions, coupled with new taxes in the law, will reduce health plan options for seniors and cut enrollment. The Congressional Budget Office projects Medicare Advantage enrollment to be 13.3 million in 2013 but only about 11 million in 2022.

Year Medicare
Advantage cut
2013 $0
2014 $8 billion
2015 $14 billion
2016 $18 billion
2017 $18 billion
2018 $16 billion
2019 $18 billion
2020 $19 billion
2021 $20 billion
2022 $23 billion

Note: Figures do not add up to $156 billion due to rounding.

Source: Letter to House Speaker John Boehner (R, Ohio), Congressional Budget Office, July 24 (link)

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