President Obama has described Medicare Advantage as a "waste," and Congress has agreed, proposing $132 billion worth of cuts to the program over 10 years in the health reform package.
While some senior citizens are worried about the cuts, experts say that payment reductions to private insurers involved in the program may pave the way for seniors to move into traditional Medicare or commercial individual plans. Under the Medicare Advantage cuts planned in reform, the first payment cuts would occur in 2011. Health insurer CEOs are advised to begin now to "absorb reduced payments," according to one health plan expert.
Private insurers involved in Medicare Advantage often offer extra healthcare that seniors in traditional Medicare don't get, such as vision care or dental, or even gym memberships. But opponents say the private Medicare Advantage plans cost the government 14% more than traditional Medicare.
The Congressional Budget Office has stated that the health reform measure passed by the House would result in a deficit reduction of $118 billion, and an additional $20 billion would come from changes included in the Senate version.
Nationwide, the average value of the extra benefits not covered by Medicare, would be cut $67 per member per month in 2019.
The Medicare Advantage reductions would cause "massive disruption for the 10 million senior citizens enrolled in the program," says Karen Ignagni, president and CEO of America's Health Insurance Plans, the insurance lobby. "If these cuts are enacted, millions of seniors will lose their coverage and face higher premiums." Senior citizens are expected to be notified of the cuts sometime this year.
Given the proposed cuts, health insurers may drop some of these extras or insurers may cut benefits and/or increase premiums, experts say.
These cuts could cost insurers to drop Medicare Advantage and seniors to leave the program. In fact, CBO estimates that Medicare Advantage enrollment would drop by 4.8 million members by 2019.
Robert Moffit, director of the conservative Heritage Foundation's center for health policy studies, calls the Medicare Advantage cuts "terrible." "It's not a pleasant situation for senior citizens. If you don't have Medicare Advantage, you have to buy supplemental coverage, employer or go into the individual market. Senior citizens are going to be very unhappy."
But the reductions are not the death knell for Medicare Advantage, says Jean LeMasurier, senior vice president for public policy for the Gorman Health Group. She says Medicare Advantage has been consistently growing "(and) companies are getting new applications, and as long as they can be competitive, they will make it work."
In a Gorman report issued earlier this year, LeMasurier stated that "Medicare Advantage plans should start preparing now to absorb reduced payment over the next few years."
The Senate bill, she says, would reduce payment "over the next decade by cutting payment 3% in 2011 and phasing in a competitive bidding process over three years. Plans should be engaged in scenario planning for their specific service areas right now to better understand the outlook."
Under the new funding scenarios, companies initiating Medicare Advantage may focus on "care coordination and client care management," she says. For those senior citizens who can't afford to stay in the program, "they may go to different Medicare, it's hard to predict now," LeMasurier says, adding that seniors are "savvy shoppers."
One argument about Medicare Advantage is that insurers should be reimbursed based on the quality of their benefits. Trish Doherty, spokeswoman for Kaiser Permanente in California, says there is a need for "incentives for high-quality Medicare Advantage plans and improvements in coverage of preventive care."
"Over the long term, we must look at how we pay for and how we provide care as a nation," Doherty says.
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Joe Cantlupe is a senior editor with HealthLeaders Media Online.
