Administration Backs Down on Medicare Cuts

The agency overseeing the system says it’s turning a proposed cut into a slight payment increase for Medicare Advantage plans.

DENVER, CO - MARCH 26: Registered nurse Susan Eager pays a house call visit to a patient on March 26, 2012 in Denver, Colorado. The Supreme Court began hearing three days of arguments over the 2010 health care overhaul Monday which will affect the entire health industry. Eager works for the Dominican Sisters Home Health Agency, a non-profit that performs thousands of home visits each year for needy patients. The agency, funded by private donations and grants, says it helps keep patients living in their homes longer, saving federal programs like Medicare millions of dollars each year. It provides home health care without charge to people with chronic diseases and gives preventative services usually not currently covered by insurance.
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Clara Ritger and Sam Baker
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Clara Ritger Sam Baker
April 7, 2014, 12:31 p.m.

The fed­er­al agency that runs Medi­care has re­versed at least some pro­posed cuts to private Medi­care Ad­vant­age plans — the second time in two years that in­surers have per­suaded the agency to aban­don cuts.

The Cen­ters for Medi­care and Medi­caid Ser­vices said Monday it would turn a roughly 2 per­cent cut first pro­posed in Feb­ru­ary in­to a 0.4 per­cent pay­ment in­crease for Medi­care Ad­vant­age plans.

In­surers, however, have said the pro­posed cut was much big­ger — closer to 6 per­cent. They ar­gued that pay­ment re­duc­tions would cause plans to either cut be­ne­fits or raise premi­ums.

The in­sur­ance in­dustry lob­bied hard to re­verse the pro­posed cuts, cor­ralling sup­port­ive state­ments from more than 270 mem­bers of Con­gress in­clud­ing a slew of Demo­crats.

In­surers suc­cess­fully turned last year’s pro­posed cut in­to a pay­ment in­crease, and were hop­ing to re­peat that lob­by­ing win this year.

Roughly 30 per­cent of Medi­care be­ne­fi­ciar­ies — about 16 mil­lion seni­ors — use the privately ad­min­istered Medi­care Ad­vant­age plans. The pro­gram con­tin­ues to grow, des­pite the Af­ford­able Care Act’s cuts. En­roll­ment rose in 2014 to 15.9 mil­lion — roughly a 9 per­cent in­crease from the year be­fore, ac­cord­ing to a new ana­lys­is from the con­sult­ing firm Avalere Health.

Crit­ics say Medi­care Ad­vant­age has long been a waste­ful sub­sidy to in­sur­ance com­pan­ies, cit­ing av­er­age per-per­son spend­ing that’s sig­ni­fic­antly high­er than tra­di­tion­al Medi­care. In­surers and their al­lies, however, note that Medi­care Ad­vant­age plans of­ten in­clude ser­vices tra­di­tion­al Medi­care doesn’t cov­er, help­ing seni­ors con­sol­id­ate their cov­er­age in one plan.

CMS said it re­versed course on the pro­posed cut after ad­just­ing its ex­pec­a­tions about the growth in Medi­care’s costs and the health of new be­ne­fi­ciar­ies, along with oth­er tech­nic­al changes.

Medi­care Ad­vant­age will con­tin­ue to face cuts that were im­posed by the Af­ford­able Care Act — roughly $150 bil­lion over 10 years — in an ef­fort to bring the amount spent on Medi­care Ad­vant­age plans closer to the amount the gov­ern­ment spends on tra­di­tion­al Medi­care. In re­cent years the gov­ern­ment had spent some 14 per­cent more on Medi­care Ad­vant­age.

“What is tre­mend­ously ex­cit­ing about the MA pro­gram today is that we have dra­mat­ic­ally re­duced that premi­um pay­ment and we have seen no change in qual­ity of care,” said Jonath­an Blum, CMS prin­cip­al deputy ad­min­is­trat­or. “We are con­fid­ent that those trends will con­tin­ue.”

Premi­um pay­ments to Medi­care Ad­vant­age have fallen 10 per­cent since the Af­ford­able Care Act passed in 2010, ac­cord­ing to CMS fig­ures.

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