The legally mandated cuts to the Medicare Advantage plans are touted by the Obama administration as fair and reasonable. The Medicare Advantage plans currently cover about 30 percent of Medicare beneficiaries. The cuts to the Medicare plan appear to be unpopular with enrollees, Republicans, and the health insurance agencies. The total cuts will come to about 5.9 percent which could, according to America’s Health Insurance Plans (AHIP), cost seniors a premium increase of anywhere between $420 and $900 each year even as benefits decline.
Republicans, perhaps anticipating this to be a campaign issue, are informing disabled and older Americans the reduction in benefits will be used to fund Obamacare. It appears though, that up until now, the federal government has paid an average of 14 percent more to Medicare Advantage plans than they have paid for similar people who are enrolled in traditional Medicare plans. The Medicare Advantage plans are offered by companies like Humana and UnitedHealth and are private plans. The enrollment in these private plans has doubled in the past eight years. Benefits such as gym memberships and lower premiums, which are not included in the traditional Medicare plan, may have played a factor in the higher enrollments.
Medicare Advantage came out in 1997 and the plan uses funding for Medicare to cover seniors through private insurance plans. Plan critics argue that the private insurance has only profited the insurance industry and has not produced any savings for the Medicare program, nor has it benefited seniors by providing better health results. The Medicare Advantage program has been repeatedly cut which is unpopular with the private insurers. The insurers receive less reimbursement with the slashes made through the Affordable Care Act. At this time, it is unclear what types of impact the payment reductions will have on the Medicare recipients.
The Medicare Advantage plans have traditionally received, on average, a higher level of funding per patient due in part to GOP-backed policies which were advantageous to the insurance companies. In the past, Democrats have attempted to regulate this imbalance by making cuts to the plan. The argument was that the higher reimbursements may be considered overpayments which encouraged waste. When the Affordable Care Act was passed in 2010, it also created funding cuts of over $200 billion to be made over 10 years.
The reductions made through the ACA began in 2012 and have not yet appeared to have harmed either the private insurers or the beneficiaries. According to administration, the Medicare Advantage premiums have dropped 10 percent while enrollment has increased over 30 percent. The federal payments made to the private insurance companies offering MA has dropped, as intended. The discrepancy between payments to Medicare Advantage insurers and traditional Medicare has been decreased from seven percent to four. More cuts to the plan are expected with payments being further reduced in 2015.
AHIP has said that it will continue to oppose cuts to Medicare Advantage and will attempt to discourage the reductions and discretionary cuts from coming to fruition. The final ruling on the cuts will not come out until April. While the Center for Medicare Advocacy believes that both traditional and Medicare Advantage plans be paid the same rates, it appears to be a source of contention for many others. Program cuts are usually unpopular and this proposed cut to a Medicare plan appears to be no different.
By Dee Mueller