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The Verdict Is In: Medicare Advantage Will Suffer Under Obamacare

Posted By Kathryn Nix On October 15, 2010 @ 11:00 am In Obamacare | Comments Disabled

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The outlook for seniors’ Medicare Advantage (MA) plans is grim under the new health care law. Though seniors’ premiums will drop 1 percent [2] in the new year, this will be the exception to the rule over the next decade.

Medicare Advantage is a popular alternative to traditional fee-for-service, allowing seniors to choose their health plan from among participating private plans. If seniors choose a plan that is less expensive than the benchmark price, they receive a rebate that can be used to add extra benefits, such as dental or vision care, or to reduce co-payments or premiums.

The new law, however, will lower the benchmark price set for MA plans. In a recent letter [3], the Centers for Medicare and Medicaid Services’ (CMS) Chief Actuary Richard Foster explains that changes made by the new law “are expected to reduce MA rebates to plans and thereby result in less generous benefit packages.” For seniors who wish to keep their current plans, out-of-pocket costs will increase. Foster writes, “Prior to this legislation, the average annual MA rebate was estimated to grow from $1,093 in 2010 to $1,580 in 2019. Under the new provisions, the average MA rebate is expected to decline from its current level to $43 in 2019.”

This is not news. Back in April, Foster warned [4], “The new provisions will generally reduce MA rebates to plans and thereby result in less generous benefit packages. We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent.”

Recent research [5] from Heritage’s Robert Book and James Capretta echo Foster’s findings. Their analysis shows the effects on enrollment and costs for MA enrollees by county [6] and by congressional district [7].

Book and Capretta write [5]:

Regardless of which outcome a particular patient experiences, every patient who would have enrolled in an MA plan under prior law will experience a loss in the value of his or her Medicare coverage. … Instead of reducing waste, the MA cuts will simply cut health care services available to patients and transfer spending from Medicare Advantage to other federal programs and other payers (including patients), thus increasing federal and state spending on Medicaid and patient spending on Part D, supplemental care plans, and out-of-pocket costs.

The effects of such aggressive cuts to Medicare Advantage were known well before the passage of the new law. Last summer, Humana warned its 930,000 MA enrollees [8] that under the health care overhaul, “millions of seniors and disabled individuals could lose many of the important benefits and services that make MA health plans so valuable.”

In an unprecedented move, CMS silenced Humana’s and all other providers’ communications regarding the health care proposals before determining if they violated any law. The Government Accountability Office writes [8]:

Although CMS’s actions generally conformed to its policies and procedures, the September 21, 2009, memorandum instructing all MA organizations to discontinue communications on pending legislation while CMS conducted its investigation was unusual. Officials from the MA organizations and CMS regional offices that we interviewed told us they were unaware of CMS ever directing all MA organizations to immediately stop an activity before CMS had determined whether that activity violated federal laws, regulations, or MA program guidance.

All told, seniors got a raw deal in the new health care law. Rather than reform Medicare the right way [9], Congress pursued a path that ignores current problems in the program and creates new ones. The best way forward for seniors and all other Americans is repeal, so that Congress can get health care right.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/10/15/the-verdict-is-in-medicare-advantage-will-suffer-under-obamacare/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/Elderly_Paying_Bills090211.jpg

[2] drop 1 percent: http://www.marketwatch.com/story/medicare-advantage-premiums-to-drop-1-in-2011-2010-09-21

[3] In a recent letter: http://op.bna.com/hl.nsf/id/bbrk-8a7t97/$File/ActuaryCMSOct2010.pdf

[4] Back in April, Foster warned: http://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf

[5] Recent research: http://www.heritage.org/Research/Reports/2010/09/Reductions-in-Medicare-Advantage-Payments-The-Impact-on-Seniors-by-Region

[6] county: http://thf_media.s3.amazonaws.com/2010/pdf/MA_County_Results_Summary.pdf

[7] congressional district: http://thf_media.s3.amazonaws.com/2010/pdf/MA_Congressional_District_Results_Summary.pdf

[8] Humana warned its 930,000 MA enrollees: http://republicans.energycommerce.house.gov/Media/file/News/101310_GAO_Report_Humana_Mailing.pdf

[9] the right way: http://www.heritage.org/Research/Reports/2008/06/The-Success-of-Medicare-Advantage-Plans-What-Seniors-Should-Know

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