Medicare Advantage Plans Become Entrenched
The Centers for Medicare & Medicaid Services (CMS) has announced that payments to Medicare Advantage plans will increase by 1.25 percent next year. Less than a month ago, the plan was to cut payments by 0.95 percent.
Medicare Advantage plans are comprehensive plans that seniors can chose instead of the traditional Medicare Fee-For-Service (FFS) model.Because they are offered by private insurers, Obamacare was supposed to crush Medicare Advantage.
However, this is the third year the Administration has flinched from cuts that would deny people access to these plans. More seniors are in Medicare Advantage today than when Obamacare was passed.
We think Medicare Advantage plans are a good thing, and a foundation for further Medicare reform. So, this development is good news. Further, there appears to be bipartisan agreement that Medicare Advantage is a good thing:
Democrats were wary of a program launched by Bush that they saw as a giveaway to insurance companies.
But as time has passed, support has grown in both parties for the program.
“The worst fears were not materialized,” said Rep. Gerry Connolly (D-Va.), who signed the letter this year against the cuts. “It’s growing in popularity among our constituents and it provides an option.” (Peter Sullivan, The Hill)
I think you exaggerate the intentions of Obama on Medicare Advantage.
I think they had no intention to crush it. They certainly had no intention to deny access to it. Very few Democrats in Washington even understand Medicare Advantage.
What they did know is that CMS pays Medicare Advantage plans on about 115% of the average spending in traditional Medicare. This extra 15% was to be hijacked to pay for the ACA — so that the ACA subsidies could be ‘funded’ without new taxes.
It was a budget game. And it failed, because I do not think that the 115% was ever lowered.
P.S. I sell Medicare Advantage plans, so I have some knowledge here.
But it was not an Obama conspiracy.
Thank you. However, there are plenty of new taxes in Obamacare, besides reducing Medicare Advantage payments.
“I do not think that the 115% was ever lowered.”
I think the subsidy today is significantly less. A number of sources starting more than a year ago have reported this. for example, here is Mark Bertolini on CNBC in 2014:
http://www.cnbc.com/id/101354183?__source=yahoo%257cfinance%257cheadline%257cheadline%257cstory&par=yahoo&doc=101354183%257cAetna+could+be+forced+out
Bertolini: “4 years ago Medicare was paying 114% of Medicare fee for service . . . now we’re down to 106% and we’re heading to 100%.” Bertolini adds that the program will “continue to grow” after the 100% point is reached.
In other words, Aetna – and other private Medicare Advantage insurers – believe that they can be profitable at the same FFS premium-equivalent to traditional Medicare while providing equal or better benefits and better service than traditional Medicare. That’s big.
It’s big because it brings good news all around: CMS sheds cost; private insurers grow profitable enrollment; taxpayers benefit [theoretically] from easing of the tax burden; and seniors who prefer Medicare Advantage over traditional Medicare still have that highly popular option available to them.
Good point, John F.
What is interesting is that Medicare Advantage premiums have not gone up much at all, as the subsidy has declined.
Whereas when the ACA was passed, John Goodman on this blog said that Medicare Advantage would become unaffordable for many with the extra 15%. No one is perfect, and I think he was wrong.
But as you say, this perhaps shows the strength of Medicare Advantage.