WASHINGTON (AP) — Cuts are on the table next year for
Medicare Advantage plans, the Obama administration says. The politically
dicey move affecting a private insurance alternative highly popular
with seniors immediately touched off an election-year fight.
The
announcement gave new ammunition to Republican critics of President
Barack Obama’s health care law, while disappointing some Democratic
senators who had called on the administration to hold rates steady.
Insurers are still hoping to whittle back the cuts or dodge them
altogether.
Late Friday after financial markets closed, Medicare
issued a 148-page assessment of cost factors for the private plans next
year. It included multiple variables, some moving in different
directions, but analyst Matthew Eyles of Avalere Health estimated it
would translate to a cut of 1.9 percent for 2015, a figure also cited by
congressional staffers briefed on the proposal.
"There’s nothing to like here if you’re one of the plans," said Eyles.
Administration
officials say the plans don’t need to be paid as much to turn a profit,
because the growth of health care spending has slowed dramatically.
They see the cuts as a dividend for taxpayers.
But the political
clout of the plans is growing as seniors flock to them seeking better
health care value. Medicare Advantage plans now serve nearly 16 million
people, or about 30 percent of Medicare beneficiaries. They can offer
lower out-of-pocket costs and broader benefits than traditional
Medicare, but often restrict choice.
Insurers say they will be
forced to pass on higher costs to seniors or cut benefits if their rates
are reduced, and some plans may drop out altogether. The impact could
vary significantly around the country.
The industry says the cuts
come as Medicare Advantage reductions programmed under the health care
law are ramping up. The law sought to compensate for prior years in
which the plans were overpaid. But it also includes a new tax on
insurers, so industry officials fear the combined impact will be much
higher.
The largest insurer trade group, America’s Health
Insurance Plans, is sparing no effort to head off cuts, with an
extensive advertising and lobbying campaign.
It has won the
support of 40 senators from both parties who, in a Feb. 14 letter,
called on the administration to essentially hold Medicare Advantage
rates steady. Among the signers were six Democratic senators in
contested races whose outcome will determine whether Obama faces a
Congress next year that’s completely controlled by Republicans.
Final
rates won’t be released until April 7, so the lobbying will get even
more intense. In prior years, Medicare has sometimes pulled back from
proposed cuts.
Friday’s announcement will help the government
decide basic rates for the Medicare Advantage plans. But the actual
change individual plans and customers eventually see will vary,
depending on factors like a plan’s quality rating or where the plan is
located.
The plans have become a key source of revenue growth for
insurers who sell and administer the subsidized coverage. They offer
basic Medicare coverage topped with extras like vision or dental
coverage or premiums lower than standard Medicare rates. There are
hundreds of different plans around the country, each with its own set of
variables like different deductibles, premiums and co-insurance.
UnitedHealth
Group Inc. and Humana Inc. are the two largest Medicare Advantage
providers. Health insurance stocks that soared in 2013 slipped at the
start of this year after Humana Inc., the second-largest in the market,
said rate cuts could be deeper than expected.
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Associated Press writer Tom Murphy in Indianapolis contributed to this report.
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