Is There A Future For Medicare Advantage


ConversationEarlier this week I was asked, again, “Are medicare advantage plans going to be eliminated under Obama care?”  I know that I have already answered this question in, “Medicare Advantage’s Future Is Bad But Not As Bad As Rumors Would Have You Believe.”

That post was written November 14, 2012.  In February, 2013 the Obama administration issued another “rule” that affects the popular alternative to federal administration of health insurance for people with Medicare.

Technically speaking, all that Obamacare does to Medicare Advantage was to “cut the fat.”  It did not come outright and eliminate the Medicare C program (that was developed by another Democratic president, Bill Clinton).

Practically speaking, it’s a different story.  It is obvious that one of the Obama administration’s goals is to get rid of Medicare C.

  1. PAYMENT CUTS IN THE PPACA – The PPACA revised the way that private insurance companies are paid to administer Medicare benefits.  While the formula for federal payments to private insurance companies was redone, payments were not completely eliminated for the top performing companies.
  2. STAR RATING SYSTEM – The PPACA authorized a new quality rating system for Medicare Advantage and Medicare D (Prescription Drug Plans).  Allegedly, plans would be rated for their quality in providing benefits to Medicare beneficiaries.  The better the quality of health care provided, the bigger the bonus from the government would be.  Unfortunately, the new system has been abused by the Obama administration.  Last November, Secretary of Health and Human Services sent a letter to all Medicare Advantage members who had 4 and 5 star rated (lowest ratings) and encouraged them to change their election.  (I have no problem advising people to seek a better quality insurance plan.  However, I do have a problem with a politician influencing the free economic choice of citizens.  It is the same problem I have with Obama’s Individual Mandate, but that is a topic for a different forum.)
  3. INDUSTRY TAXES – In addition to the payment cuts and new star rating that are in Obamacare, private health insurance companies will be slapped with $200 billion of new taxes over the next 10 years.  The taxes that will be levied on the health insurance companies are equivalent to $8 billion for this year and will increase each year.  (I have no problems with insurance companies being taxed if they pay the tax.  I do not believe that will be the case.  The insurance industry has already said that the new taxes will be passed on to those who have health insurance in the form of higher premiums.  That includes people with Medicare Advantage.)
  4. RECENT MLR EXPANSION – Earlier this month the Centers for Medicare and Medicaid Services (CMS) announced that the Medical Loss Ratio that required health insurance companies to spend 80% of the money they get in premiums for health care.  (After reading about the expansion I made some calls.  I was assured that most Medigap plans were already in compliance with the regulations.)
  5. ADDITIONAL PAYMENT CUTS – At the same time that CMS announced the expansion of the MLR requirement to Medicare Advantage providers, they announced another cut of 2.2% in the amount that private insurance companies would be paid by the federal government.

RESULT

While one, or even two, of the changes to Medicare Advantage would be survivable, when all of the actions of the Obama administration are combined it is possible that the Medicare Advantage program is slowly dying.

America’s Health Insurance Plans have calculated the cost to health insurance companies.   They estimate, “The cumulative impact of these changes will reduce Medicare Advantage payments next year by more than eight percent, or approximately $11 billion.”

Since Medicare Advantage contracts are only good for one year at a time, even though many of the plans for 2013 seemed “too good to be true,” I do not hold out hope that they will continue to be as generous in the future.

Industry analysts predict that insurance companies will be forced to increase premiums, eliminate benefits or both in the coming years.  If that happens, many Americans, who are able to, will be forced back to Original Medicare with Medigap and Medicare D supplements.

Each week I send an email to my client to keep them updated on news and trends in the insurance industry.  With the imminent arrival of Obamacare’s Individual Mandate and the health insurance exchanges, most of the emails for this year have been about Obamacare.

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