Health Care

Policy Feature Issue: If You Like Your Health Care Plan You Can Keep It – Not So in the Individual Market. Not so with Employer Sponsored Plans. And, Not for Seniors Enrolled in Medicare Advantage

Policy • December 3, 2013

What is Medicare Advantage?

Medicare Part C, also known as Medicare Advantage (MA), provides private plan options to Medicare-eligible beneficiaries. Approximately 14.8 million individuals, 28 percent of all Medicare beneficiaries, are enrolled in Medicare Advantage plans, which include health maintenance organizations, preferred provider organizations, private-fee-for-service plans, and special needs plans.[1]  In the MA program, payments are made to private plans on behalf of beneficiaries from both the Health Insurance Trust Fund (HI) and the Supplemental Medical Insurance (SMI) fund.[2]  In 2012, approximately $136 billion from both the HI and SMI funds was directed toward MA plans.[3]  Enrollment in MA plans has grown over the years from 1.3 million in 1985 to 14.8 million in 2013.[4]  Studies have identified the MA program as more effective than the traditional fee for service,[5] particularly among those individuals with chronic conditions and those individuals who reside in rural areas.[6]

What is the Issue?

Obamacare makes more than $300 billion in reductions to the MA program.[7] Of that, more than $156 billion are direct cuts.[8] An additional $152 billion in reductions to the traditional fee-for-service program will also indirectly impact MA plans. Finally, the health insurance tax is estimated to cost each MA beneficiary approximately $3,590 over ten years.[9] While “the majority of cuts have not yet occurred, [beginning] in 2014 and 2015, 53 percent of the cuts will go into effect, which has the potential to impact beneficiaries.”[10] In fact, few of the scheduled reductions occurred prior to 2014 as a result of an $8.3 billion demonstration project authorized by the Centers for Medicare & Medicaid. According to the House Committee on Energy and Commerce, GAO questioned the legality of this project in 2012.[11]

What Does this Mean?

Currently 14 million seniors and disabled Americans benefit from the MA program. However, the planned Obamacare cuts to the MA program, will “force insurers to scale back …benefits…or to withdraw their plans entirely from some markets.”[12] In fact, “MA enrollees will lose $3,714 worth of extra services by 2017… and 7.4 million beneficiaries who would have enrolled in MA in 2017 will be forced into less preferable options by the MA cuts. That’s a full 50 percent reduction in expected MA enrollment.”[13]

In fact, in 2014 many seniors are expected to lose their existing MA plan. According to the Energy and Commerce Committee, a report issued by the Kaiser Family Foundation reveals that more than 526,000 beneficiaries will be forced to switch to another MA plan or return to traditional fee-for-service. Specifically, more than 105,000 of those “enrolled in a MA plan in 2013 will not be able to enroll in a Medicare Advantage in 2014.”

What You Need to Know About Obamacare and the MA program

  • Obamacare cuts more than $308 billion in the MA program.[14]
  • Seven million seniors and disabled Americans can expect to lose their existing MA coverage by 2017.[15]
  • Obamacare imposes a $3,590 tax burden on every MA enrollee over ten years.


[1] See CRS Medicare Financing: September 19, 2013, p24.

[2] See id.

[3] See id., p8.

[4] See CRS Medicare Financing: September 19, 2013, p24.

[5] See What You Need to Know, Medicare Advantage: Providing High Quality, Cost Efficient Care for Medicare Beneficiaries.

[9] See AHIP, Medicare Advantage: ACA Cuts More than $200 billion from Program.

[10] See id.

[13] See id.

[15] See id.

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