The insurers blame federal reductions in rates paid to Advantage plans as a major reason for the changes. Physician groups are raising alarms. More than 25% of beneficiaries nationwide belong to Advantage plans. But Larsen predicted the changes would create a more sustainable Medicare Advantage program. “This turmoil we're in is heading for a better place,” he said. “That's my forecast.”
Under the Patient Protection and Affordable Care Act, it's projected that Advantage plans will face payment cuts totaling $135 billion over 10 years, though insurance industry lobbyists pressured the Obama administration to convert proposed rate cuts this year into rate increases. The ACA cuts were designed to help pay for the law's expansion of coverage for the uninsured. In addition, experts said Advantage plans were being overpaid relative to the costs of the traditional Medicare program. Some predicted doom for Advantage plans. Besides the ACA-related cuts, Advantage plans are experiencing rate cuts under the continuing budget sequester.
But Advantage enrollment has grown at a rate of roughly 10% per year since passage of the ACA. According to a recent study by the Kaiser Family Foundation, 14.4 million individuals were enrolled in private Medicare plans in 2013. “Seniors continue to enroll because they like the additional benefits,” said Robert Zirkelbach, spokesman for America's Health Insurance Plans.
In 2012, according to the Medicare Payment Advisory Commission, payments to Advantage plans amounted to 107% of what the government spends on traditional Medicare enrollees, totaling $9 billion in additional spending.
Sheryl Skolnick, an insurance industry analyst with CRT Capital Group, said payments to plans will decrease by about 3.5% in 2014. Insurers, she said, have limited options to squeeze costs on the benefit side because plans must meet Medicare minimum benefit requirements.
Donald Crane, California Association of Physician Groups president, estimated that most Advantage plans in his state are looking at a cut of around 5% for 2014. “We've already had a severe haircut,” he said. “We're almost into skinhead mode.”
Consultant John Gorman of the Gorman Group said he doesn't believe the cuts are going to be that steep when all factors are considered, estimating that plans will see a cut of less than 1% in 2014 but will face more reductions in 2015.
UnitedHealthcare and Humana are the biggest players in the Advantage marketplace. Skolnick said UnitedHealthcare faces more pressure because it has fewer “four-star-rated plans that are eligible for bonus payments for higher quality."
Earlier this month, Minnesota Attorney General Lori Swanson sent a letter to the CMS calling for an investigation into Humana's Advantage plans sold in the state, which cover 100,000 Minnesotans. Some enrollees claimed they were denied reimbursements for needed services. In a written statement, Humana said it has not received any communication from Swanson's office or the CMS about the concerns.
UnitedHealthcare has come under fire from physician groups over what has been described as “abrupt” terminations made without cause or explanation. The Medical Society of New Jersey and the American College of Cardiology have criticized the manner of the terminations and their timing during Medicare open enrollment.
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