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Uncovering Medicare Advantage Cuts' Brighter Side

Christopher Cheney, for HealthLeaders Media, August 6, 2014

With several years of reimbursement rate cuts expected, large Medicare Advantage insurance carriers have distinct advantages over their smaller counterparts. For one thing, the cuts are driving efficiency gains and zapping waste.

For Medicare Advantage carriers, size matters.

Over the past two weeks, Moody's Investor Service, Aetna, and a House Ways and Means subcommittee hearing have illuminated the prospects for payer success in the MA realm.

The program is feeling the pinch of reimbursement cuts linked to a decade-long, $300 billion reduction in Medicare funding to help finance the implementation of the Patient Protection and Affordable Care Act.

Last week, Moody's released a report focused on large MA carriers titled "Medicare Advantage Cuts: Prognosis Not Bad for Most Health Insurers." The report's key findings speak volumes about the big players in the MA business. Four out of five of the top MA carriers have a "manageable" MA risk exposure because they operate several other insurance lines, Moody's says.

And MA products are "sustainable" despite the reimbursement cuts and potential for lower membership growth rates, and the "track record" and "adaptability" of large MA carriers indicate they can weather the reimbursement cut storm.

After reading the Moody's report, I spoke with an official at Aetna, one of the large MA carriers the investor service had analyzed. The Hartford-based insurance giant does indeed appear to have a manageable and sustainable MA business with a track record of adaptability.

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