Insurance execs vow to fight further cuts to Medicare Advantage

Health insurers are justified in raising alarms about the harmful effects of Medicare Advantage program cuts, executives with two of the country's largest health plans said Wednesday at a Washington forum. They promised to fight further reductions in spending on the popular coverage program for seniors.

“It has really not been adequately funded for the last four years,” said Stephen Hemsley, CEO of UnitedHealth Group, the largest insurer in the country in terms of live covered, speaking at the CAPG Colloquium on Physician Groups in Medicare Advantage. “It is too large and too important for it to be weakened by insufficient funding.”

Hemsley said that recent reductions in funding to the private Medicare program have resulted in a $900 average annual cost shift to UnitedHealth beneficiaries in terms of increased premiums or reduced benefits. He warned that the cuts are jeopardizing a program that has delivered better health outcomes and is more popular than the traditional fee-for-service program.

“I don't understand the funding dynamic,” Hemsley said. “I would be putting more funding into that program because of its attributes and because of who it serves.”

Humana CEO Bruce Broussard indicated that funding for Medicare Advantage has been reduced by 18% in recent years and that the company currently has a 5% profit margin on that book of business. “It's going to be challenging,” Broussard said of the program. “No ifs, ands or buts about it.”

Humana and UnitedHealth each had roughly 3 million Medicare Advantage members at the close of the second quarter of this year. Combined they represent nearly 40% of the market.

The Patient Protection and Affordable Care Act included rate reductions of $136 billion over the course of a decade, according to the Congressional Budget Office. America's Health Insurance Plans, an insurer trade group, says the cuts total considerably more than $136 billion when all revenue is considered.

The cuts were designed to bring the costs of the program more in line with the traditional fee-for-service program. In 2010, the average Medicare Advantage beneficiary cost 113% as much as their counterparts in the traditional program, according to the Medicare Payment Advisory Commission. That disparity has been narrowed to 106% this year.

There were widespread predictions at the time of the passage of the federal healthcare law that it would lead to a reduction in the number of individuals opting for private Medicare plans. But that hasn't played out: Roughly 30% of all beneficiaries are now enrolled in private plans.

Medicare Advantage insurers have waged vigorous lobbying campaigns to combat spending reductions proposed by the CMS in recent years. In each of the last two years, they have been successful in convincing the Obama administration to roll back some of the spending cuts.

Hemsley indicated that UnitedHealth and other insurers with a heavy presence in Medicare Advantage will continue to fight any further reductions in spending on the program. “We have to advocate all the time,” Hemsley said. “I wouldn't be here delivering this message if I wasn't concerned with what the funding pattern has been.”

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