Obama Administration Plans to Cut Medicare Advantage Reimbursements
(CNSNews.com) – The Obama administration is planning new cuts to Medicare, a federal regulatory filing reveals, cuts that could mean higher premiums or seniors losing their coverage altogether.
The new cuts come in the form of a planned reduction in the reimbursement rates the government pays to insurance companies that operate Medicare Advantage plans, which are services administered by private for-profit or non-profit providers that offer additional services than can be found in traditional Medicare.
In a Feb. 15 regulatory filing, the Centers for Medicare and Medicaid Services (CMS) announced the surprised rate cuts of 2.3 percent – meaning it would pay health care providers 2.3 percent less for providing services to patients.
CMS said it was cutting payments because it foresaw the overall costs of the Medicare Advantage program shrinking by 3.2 percent, despite the fact that health care costs – the driver of all federal health care program costs – are only rising.
Medicare Advantage is like traditional Medicare except that its plans are administered by insurance companies, who are paid a per-enrollee reimbursement fee by the government. If insurance companies can provide care to seniors at less than what the government pays them for it, they make a profit.
Medicare Advantage provides coverage for approximately 28 percent of all Medicare beneficiaries, offering them higher-quality services and additional benefits, such as vision and dental care, than the traditional government program at slightly higher cost.
The Obama administration already plans to cut the Medicare Advantage program by $200 billion as part of Obamacare. However, the proposed reductions it announced in February are new, and will cut the program in addition to the planned $200 billion in Obamacare cuts, most of which are delayed in 2014.
The new cuts are also scheduled to go into effect in 2014, but as a function of the normal rate-setting process for that year, not a political effort to delay financial pain for seniors past an important election, as apparently was the case with the original Medicare cuts that Obama signed.
In its regulatory announcement, the CMS said it was assuming that reimbursement payments in traditional, government-run Medicare will be cut, and cited that as justification for cutting Medicare Advantage.
However, while those cuts to traditional Medicare have been set into law for more than a decade, Congress has never allowed them to happen, instituting what is known as the Doc Fix every year, to keep reimbursement payments the same.
Senator Marco Rubio (R-Fla.) wrote to the CMS urging them to consider political reality and reverse their planned Medicare Advantage cuts.
“This assumption is highly problematic because – even though it almost certainly will turn out to be wrong – it translates into lower funding to support the health benefits of the 14 million Medicare beneficiaries who are currently enrolled in MA [Medicare Advantage] plans,” Rubio wrote on March 8.
In other words, if the Obama administration continues with its proposed new Medicare cuts, some or all of the 14 million seniors who get health care through the MA program could be negatively affected, that is, paying higher premiums or possibly losing coverage.
This is because the proposed cut could make the program unprofitable for insurers, who would be forced to either stop offering MA plans or pass the increased costs on to seniors in the form of higher premiums.
One health insurance provider told its shareholders that the proposed rate cuts could mean the end of Medicare Advantage all together.
“There are going to be some markets that at these rates, if they go the way they’re going, it’s going to be very hard for Medicare Advantage to survive,” Universal American Corp CEO Richard Barasch said in a February 19 conference call with shareholders, the industry publication Health Plan Week reported.
“I think it’s going to be sort of a market-by-market, company-by-company exercise,” Barasch said.