Cuts to Medicare Advantage Reversed

The Cuts to Medicare Advantage were reversed. The Centers for Medicare and Medicaid Services (CMS) announced in early April that a 2.2% cut in spending for Medicare Advantage, proposed in February to be implemented in 2014, would be reversed. Instead, per person reimbursement rates for Medicare Advantage will be increased by 3.3%. The announcement is a significant victory for insurance industry lobbyists, and secures the Medicare Advantage program for the immediate future, though it still faces challenges ahead.

What is Medicare Advantage?

Medicare Advantage (Medicare Part C) allows Medicare eligibles to choose a private insurer to provide their Medicare coverage. The government pays private insurers to provide at least the same coverage as original Medicare. Because Medicare Advantage plans usually provide somewhat better coverage than traditional Medicare alone and are usually less expensive than Medicare Supplement insurance, they are particularly attractive to those wanting to saving on their monthly premium and who are willing to accept PPO or HMO type provider networks. About a quarter, or 25%, of seniors choose Medicare Advantage.

Why were Medicare Advantage cuts reversed?

CMS proposed the Medicare Advantage cut in February in part because of the overall slowdown in spending and in part to open discussion about the program. There resulted plenty of comment and feedback, especially from senior groups, lobbyists, politicians and bureaucrats. Members of Congress came together in an unusual bipartisan effort in opposition to the cuts. Insurance industry lobbyists worked especially hard to reverse the cuts, which were viewed as potentially devastating to Medicare beneficiaries currently on Medicare Advantage plans.

Since insurers typically shoot for about a 5% profit margin, the proposed 2.3% cut, along with other market factors, could have easily made some Medicare Advantage providers not profitable. The stock prices of those companies writing the most Medicare Advantage coverage, which dipped when the cuts were announced, rose again at the announced increase in reimbursement.

What does this mean to the future of Medicare Advantage Plans?

Given the strong support for the Medicare Advantage program shown by influential members of Congress of both parties, it remains to be seen what will become of the reductions built into Obamacare. Possibly the incremental approach taken by that legislation will meet with less opposition than the cuts which have just been reversed. Also, the direction in which the overall economy moves in the coming years will affect lawmakers’ views on spending. This will be an aspect of the implementation of Obamacare worth watching as the Medicare eligible population continues to grow.

How can I review my Medicare Advantage Options?

The licensed Benefits Advisors here at Medicare Pathways can assist you in reviewing your Medicare options.  We offer multiple Medicare Advantage plans so we can help you review what is available in your area. Each Benefit Advisor has completed extensive training on Medicare and can help you review and recommend a plan.  Please click here to request a quote or call 1-866-466-9118 to speak with on of our Benefit Advisors now.