Insurers Defend Medicare Advantage in Wake of HHS Warning

Elyas Bakhtiari, June 9, 2010

The deadline for 2011 Medicare Advantage carrier bids this Monday provided another flash point in the ongoing clash between insurers and the government, as cuts to the MA program—as well as the possibility of higher rates for seniors—inch closer to enactment.

The latest tiff comes as lawmakers who voted for major cuts to MA now appear concerned that those cuts could be passed on in the form of higher rates or fewer benefits for seniors.

"Healthcare reform strengthened Medicare and made Medicare Advantage more competitive, but it is critical that we don’t let private insurance companies use these changes as an excuse to raise premiums or cut benefits for seniors to bolster their own bottom line," said a group of Democratic members of Congress in a letter last week to HHS Secretary Kathleen Sebelius.

The letter cited a recent study from the Government Accountability Office that found some lower-cost Medicare Advantage plans had higher levels of cost sharing and unexpected expenses. The legislators asked Sebelius to "hold MA plans accountable for their bid submissions," and essentially prevent insurers from cost-shifting.

Although the $136 billion in cuts over 10 years won't kick in until 2012, the MA 2011 payment rates will be frozen at 2010 levels. Even though medical expenses are expected to continue rising, Sebelius said that "Medicare Advantage plans [should] offer the same level of choices at affordable cost-sharing and premiums next year that they do this year," in a letter to WellPoint Inc., Cigna Corp., BlueCross BlueShield Association, and Health Care Service Corp.

Sebelius also asked the insurers to "focus on price and quality rather than asking seniors who need healthcare the most to pay more for it," as they submitted their bids on Monday.

But the insurance industry countered with a letter and study of its own in an attempt to defend Medicare Advantage plans.

Karen Ignagni, president of America's Health Insurance Plans, sent a letter on Friday to Secretary Sebelius touting the quality benefits of MA plans and warning of potential consequences that may follow cuts to the program.

Ignagni cited a study released this week by AHIP that found MA patients have lower risk-adjusted readmission rates than Medicare fee-for-service enrollees. The report only analyzed data from nine states, but found that readmission rates were 14%-29% lower for MA enrollees.

The letter to Sebelius also hinted at the premium hikes that lawmakers fear if the cuts are enacted. "History has demonstrated that inadequate Medicare Advantage payments result in higher premiums and reduce benefits and choices for seniors," Ignagni wrote.

Although Secretary Sebelius has the authority to deny bids, the prospect of higher premiums in an election year may worry legislators who promised before reform legislation passed that cuts wouldn't affect seniors.

Elyas Bakhtiari Elyas Bakhtiari is a freelance editor for HealthLeaders Media.
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