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The Mystery About Obama’s Medicare Cuts The Mystery About Obama’s Medicare Cuts

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The Mystery About Obama’s Medicare Cuts

Four days after the proposed 2015 payments were unveiled, no one really knows how much of a cut insurers are facing.



The Obama administration unveiled its latest round of proposed cuts to the Medicare Advantage program Friday, but days later even the insurance industry isn't sure how big a blow the administration dealt.

The payment regulation itself, and an accompanying press release, didn't make it easy to figure out exactly what the Medicare agency was proposing—aside from the fact that it was definitely a cut, of some magnitude. An email sent Monday by the trade group America's Health Insurance Plans, says Wall Street analysts are estimating cuts of anywhere between 4 percent and 9 percent to the program.


Without its own estimates of the impact, AHIP's spokesman Robert Zirkelbach repeated the line insurers have been pushing for weeks: Any cut is too big.

"The goal here is to keep payments flat, given that the program just saw a 6 percent cut last year," Zirkelbach said.

Roughly 30 percent of Medicare beneficiaries are enrolled in private insurance through the Medicare Advantage program, and according to consulting firm Avalere Health, the program's numbers continue to swell despite the measured implementation of new cuts. Health plans face some $150 billion in Medicare Advantage reductions over the next 10 years due to the Affordable Care Act, as lawmakers seek to rein in overspending in the program.


At the top of the spectrum, Bank of America/Merrill Lynch analysts pegged the total industry impact to be about -9.3 percent, while Wells Fargo's gurus estimate a much lower -3.79 percent impact.

The Centers for Medicare and Medicaid Services, however, continues to push -1.9 percent. That number, an agency spokesman wrote in an email, is the estimated proposed 2015 payment reduction rate, based on the combined growth rates in traditional Medicare and Medicare Advantage.

The growth rate by itself does not account for cuts imposed by the Affordable Care Act, the new health insurance tax, the end of a quality bonus program which insurers qualified for through this year, and other changes such as no reimbursements for home health and reductions for coding.

Wall Street analysts did factor those additional proposals into their estimates. CMS did not provide the combined impact of its proposed policies on the industry, when asked.


Despite the proposed cuts, insurance companies' stocks rose Monday. Humana, for instance, had initially predicted worse cuts than what it interpreted from Friday's announcement.

CMS is expected to release the final rates on April 7.

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