February 17, 2012

Medicare Advantage Soon in Trouble

 Earlier this month, CMS announced proudly that Medicare Advantage (MA) premiums have fallen by 7 percent and enrollment has increased by 10 percent since February 2011.[1]  Specifically, premiums have fallen from $33.97 in 2011 to $31.54 in 2012 while enrollment has increased from 11.7 million in 2011 to 12.8 million in 2012.

“The Medicare Advantage program is stronger than ever,” said HHS Secretary Kathleen Sebelius.  “Premiums are down on average, enrollment is up, and thanks to the Affordable Care Act we have unprecedented new tools to ensure that seniors and people with disabilities are getting the best value out of their coverage.”

Not so fast, according to Kathryn Nix of the Heritage Foundation.  Ms. Nix confirms the findings of an earlier report from the Medical Industry Leadership Institute and Carlson School of Management which explains with a state by state analysis how access for Medicare beneficiaries will change dramatically for the worse as a result of billions in payment cuts to MA plans in the president’s government takeover of healthcare law.

Nix explains “the catch is these cuts haven’t kicked in yet.  Obviously, you cannot cut a program by $145 billion and expect there to be no consequences…Phased in between 2012 and 2017, the MA cuts will substantially restrict the ability of Medicare beneficiaries to choose the health plans that best meet their needs and will results in substantial reductions in coverage for many millions of seniors and disabled Americans.”

So where is the disconnect between the Administration’s glee over the new MA numbers and what, in fact, is surely coming to the detriment of MA beneficiaries? 

“The fact that premiums fell this year in no way disputes that this will be the future of Medicare Advantage,” says Nix. 

The Medical Industry Leadership Institute and Carlson School of Management report explains “MA plans will have to cut healthcare benefits, increase cost sharing, or increase premiums (or some combination thereof)…with lower payments and fewer enrollees, fewer MA plans will be able to stay solvent…Medicare beneficiaries will either lose their MA coverage altogether…or be faced with higher out of pocket costs and/or benefit reductions.”

Here’s the catch.  The MA cuts were scheduled to begin this year but the Administration put the brakes on because of election year politics.  Instead, through a temporary demonstration program, CMS doled out nearly $7 billion in bonuses to hundreds of MA plans thereby cancelling out what would have been the early impacts of reduced payments.

Nix explains, however, “once the Obamacare cuts to Medicare Advantage are actually implemented and fully phased in by 2017, their damaging effects will be obvious.  For now, the Administration’s claims that it somehow saved or strengthened Medicare Advantage are laughable.”

Indeed, the Medical Industry Leadership Institute and Carlson School of Management report concludes “by 2017, when the changes are fully phased-in, enrollment [in MA plans] is expected to be 50 percent lower, the average would-be beneficiary will lose $3,700 in benefits…and the number of [MA plan] choices available in the average county will be reduced by about two-thirds.”  Even Medicare’s own Actuary predicts MA enrollment could be cut in half by 2017 as a result of the cuts (from projected 14.8 million enrollees to only 7.4 million).

“The left has done little more than ‘take credit for a popular program [they] really want to kill’” says Nix quoting health policy expert Robert Laszewski.

The Administration would do well to level with the American people about the uncertain future of the Medicare Advantage program rather than suggesting disingenuously that it may flourish under the president’s government takeover of healthcare law.

 

 

Key Take-Aways New lower premiums and higher enrollment numbers for Medicare Advantage (MA) plans do not reflect the imminent negative trajectory of the program. The Administration’s taking credit for improving MA program numbers is highly disingenuous. In reality, the president’s government takeover of healthcare law will significantly reduce the attractiveness of the MA plans able to survive the law’s deep cuts to the program.

 

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