One of the most common Republican narratives during the health care reform debate argued that lowering the subsidy to private insurers participating in Medicare Advantage would force companies to stop offering coverage, causing 10 million seniors to lose their Medicare benefits. Republicans introduced numerous amendments instructing Congress to remove the cuts to the Medicare Advantage program and Sen. John McCain (R-AZ) even urged seniors to rip up their AARP cards in protest of the organization’s support for the reductions.
But on Friday, a new report from the Kaiser Family Foundation found that the GOP’s dire predictions are not coming true. In fact, “enrollment in Medicare Advantage continued to rise despite changes in the law that froze Medicare Advantage payment rates to 2010 levels”:
Despite concerns about the effects of the 2010 health reform payment reductions on Medicare Advantage plans, enrollment has continued to rise, average premiums have declined, and many large national firms are keeping a strong foothold in this marketplace. As in past years, Medicare Advantage enrollees appear to be attracted to plans as a source of relatively affordable supplemental coverage, with lower premiums than beneficiaries typically pay for Medigap supplemental policies.
The Affordable Care Act — which cut $145 million over 10 years from Medicare Advantage– froze the 2011 reimbursements to health plans at 2010 levels, meaning that insurers were paid 10 percent more than rates to health care providers in traditional Medicare, compared with 13 percent more in 2009. Beginning in 2012, the growth in payments will continue to decrease by different amounts in different parts of the country. But ultimately, offering benefits will still be profitable, Democrats argued, and will encourage inefficient Medicare Advantage plans to follow the model of the efficient plans without undermining access to guaranteed benefits. The law also introduced a system of bonus payments to reward plans with superior performance.
Executives from firms that participate in Advantage told Kaiser that even with the cuts, “the amount of money that flows to Medicare plans is significant. A single Medicare enrollee draws about $910 a month for private plans, according to Barlcays Capital analyst Joshua Raskin. Plans expect to earn about $41 a month per member, after paying medical expenses. That’s more than double the average earnings from commercially insured members, according to Raskin’s analysis.” The analyst said “he expects plans to continue to remain profitable and grow, despite the cuts, albeit more slowly than they would have without the health law.”