Medicare Advantage Faces Rate Cut

Some 30 percent of seniors in the Medicare program get health insurance through the private option.

WASHINGTON, DC - JUNE 20: Health and Human Services Secretary Kathleen Sebelius gives brief remarks at the beginning of a news conference about Medicare at HHS June 20, 2011 in Washington, DC. Sebelius announced a new report showing that more than 5 million Americans with Medicare took advantage of one or more recommended free preventive medical benefits made available by the Affordable Care Act. Preventive care services include 'wellness' visits, bone mass measurements and cardiovascular, colorectal cancer and diabetes screenings. 
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Sam Baker and Clara Ritger
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Sam Baker and Clara Ritger
Feb. 21, 2014, 1:12 p.m.

Medi­care Ad­vant­age plans are fa­cing a pay­ment cut next year, the fed­er­al Medi­care agency said Fri­day.

The ad­min­is­tra­tion’s planned cut in­to Medi­care Ad­vant­age — privately ad­min­istered plans that serve about 30 per­cent of seni­ors — de­fies a months-long lob­by­ing cam­paign from in­surers. The in­dustry has mar­shalled bi­par­tis­an sup­port in Con­gress for their ef­fort to block the pay­ment cut. They ar­gue that the Af­ford­able Care Act — which im­poses roughly $150 bil­lion in cuts over 10 years — has already jeop­ard­ized the be­ne­fits the 16 mil­lion seni­ors in the pro­gram re­ceive.

“To sug­gest that cut­ting $200 bil­lion from Medi­care Ad­vant­age can be done without im­pact­ing seni­ors’ be­ne­fits is just wrong,” said Robert Zirkel­bach, spokes­man for the in­dustry as­so­ci­ation Amer­ica’s Health In­sur­ance Plans. “Medi­care Ad­vant­age plans are try­ing to do everything they can to pre­serve be­ne­fits and mit­ig­ate the costs for be­ne­fi­ciar­ies.”

The cuts im­posed by the health care law were aimed at stop­ping his­tor­ic over­spend­ing in the pro­gram, which cost about 14 per­cent more than tra­di­tion­al Medi­care cov­er­age, ac­cord­ing to re­ports. Poli­cy­makers ap­proved the cuts in an ef­fort to in­crease ef­fi­ciency in provid­ing Medi­care cov­er­age through private plans, but in­surers say those cuts will be passed down to seni­ors.

In­surers have the sup­port of a grow­ing co­ali­tion in Con­gress; 40 sen­at­ors sent a let­ter to the Cen­ters for Medi­care and Medi­caid Ser­vices, the Health and Hu­man Ser­vices agency that over­sees the Medi­care pro­gram, ask­ing for pay­ment rates to be kept level.

AHIP is us­ing its “Seni­ors Are Watch­ing” cam­paign to re­mind the Belt­way audi­ence that be­ne­fi­ciar­ies will see the ef­fects of pay­ment cuts in late Oc­to­ber — just be­fore the midterm elec­tions. The lob­by­ing and pub­lic-re­la­tions blitz will likely last through April, when CMS must fi­nal­ize next year’s pay­ment rates.

There’s a chance CMS could back­ped­al. Last year the agency re­versed a 2.3 per­cent cut in­to a 3.3 per­cent in­crease, and AHIP is hop­ing for at least a flat rate — if not an­oth­er re­versal — this year.

“We con­tin­ue to be­lieve that in a chal­len­ging con­gres­sion­al elec­tion year for Demo­crats that the Obama ad­min­is­tra­tion will likely mod­er­ate these pro­posed rate cuts,” wrote Paul Held­man in an ana­lys­is of the pro­posed pay­ments. Held­man is a seni­or health policy ana­lyst at Po­tom­ac Re­search Group, an in­de­pend­ent in­dustry re­search firm.

But Demo­crats have been wary of Medi­care Ad­vant­age since the pro­gram began. Many lib­er­als see it as an un­ne­ces­sary sub­sidy for in­sur­ance com­pan­ies, while Re­pub­lic­ans say it’s a prom­ising way to bring com­pet­i­tion in­to the health care mar­ket.

Al­though Medi­care Ad­vant­age plans are more ex­pens­ive than tra­di­tion­al Medi­care, they of­ten cov­er ser­vices that tra­di­tion­al Medi­care doesn’t — which is part of the reas­on the pro­gram has be­come so pop­u­lar.

En­roll­ment rose in 2014 to 15.9 mil­lion en­rollees, roughly a 9 per­cent in­crease from the year be­fore, ac­cord­ing to a new ana­lys­is from the con­sult­ing firm Avalere Health.

Roughly 30 per­cent of Medi­care be­ne­fi­ciar­ies are choos­ing in­sur­ance plans through Medi­care Ad­vant­age, rather than tra­di­tion­al Medi­care ad­min­istered by the fed­er­al gov­ern­ment.

“MA plans con­tin­ue to in­crease en­roll­ment by find­ing new ways to of­fer at­tract­ive be­ne­fits and value to be­ne­fi­ciar­ies,” Avalere CEO Dan Mendel­son said in a press re­lease.

The Con­gres­sion­al Budget Of­fice pre­dicted en­roll­ment would fall after the health law and its Medi­care Ad­vant­age cuts passed, but data from the Kais­er Fam­ily Found­a­tion show a steady in­crease of about 10 per­cent an­nu­ally since 2009 in the pro­gram.

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