Centers for Medicare & Medicaid Services (CMS) recently proposed to reduce Medicare Advantage payments by 2.3 percent for 2014. Medical costs are projected to increase by three percent during this period. This reduction is on top of the payment cuts and taxes because of the healthcare reform law.
Medicare Advantage provides comprehensive medical coverage to seniors and other Medicare beneficiaries through private insurance. It is a replacement from Medicare Parts A, B and sometimes D. Medicare Advantage plans are popular because of the additional benefits these plans provide over traditional Medicare. More than 14 million seniors, or roughly 28 percent of all Medicare beneficiaries, have chosen to enroll in a Medicare Advantage plans.
The AHIP report estimates that the new proposed payment cuts combined with the reform law’s payment cuts and taxes will result in benefit reductions and increases in Medicare Advantage costs. Premium increases of an average $50 to $90 per month will be typical for the 2014 benefit year.
Medicare Advantage was created in 2003. On average, private plans cost Medicare 14% more than the cost of traditional fee-for-service Medicare. The target amount is to pay only 4% more. source
“The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare,” said AHIP President and CEO Karen Ignagni.
According to Jonathan Blum, acting principal deputy administrator CMS, the
Medicare Advantage insurance plans that meet the program’s higher quality standards should be in a strong position to withstand federal payment reductions proposed for 2014. Enrollment in plans with four-star and five-star Medicare quality ratings have more than double in recent years, despite a huge drop in federal payments.
The amount CMS pays to Medicare Medicare Advantage insurers is tied to a rating system linked to a series of quality performance standards. Bonuses are given to plans with top rankings. Thirty seven percent of Medicare Advantage beneficiaries are now enrolled in four- and five-star plans, according to Blum, up from 16 percent in recent years. Beneficiary premiums have fallen 10 percent since the reform law’s enactment.
“Those plans who are below four-star are facing, given what we’ve proposed, the greatest payment challenge. But I believe that plans that have made the transformation to provide four- star/five-star care will have a strong business model,” Blum said in testimony before the panel.