Medicare Advantage cuts are likely for insurers
Insurers will likely see Medicare Advantage cuts
HHS has offered a picture of what it expects certain insurance payment and coverage provisions to look like in 2014, and, when it comes to payment rates, insurers don’t like what they see. The first glimpse came when HHS released—after the market closed Feb. 15— proposed Medicare Advantage and Part D plan payment and policy changes that drew the ire of trade group America’s Health Insurance Plans and sent health insurance company shares tumbling the following week. Days after the notice, HHS issued its final regulation on the healthcare reform law’s essential health-benefits provision that received little reaction from the industry because it largely mirrored the department’s proposed rule and earlier guidance.
In an advance notice and comment letter for Medicare Advantage and Part D plans, the CMS announced for 2014 a negative 2.2% growth percentage rate, a metric that is used to help calculate the payment benchmarks for Medicare Advantage plans in counties nationwide. The agency attributed the negative growth rate to “historically low growth in Medicare per-capita spending” that it attributes to efforts the Medicare program has made to combat fraud and promote quality over volume. The CMS also proposed beneficiary deductible levels, outof-pocket thresholds and coverage limits for Medicare Part D next year.
Insurers took a bleak view of the news, as the estimated negative 2.2% growth percentage rate translates into reduced payment levels for Medicare Advantage plans. In a statement, AHIP President and CEO Karen Ignagni said the proposed changes are a “crushing blow” to about 14 million seniors and people with disabilities who count on Medicare Advantage.
“These cuts will compound the $200 billion in Medicare Advantage cuts and the new health insurance tax included in the healthcare reform law,” Ignagni said. “The Congressional Budget Office projects that the reform law’s payment cuts alone will result in 3 million fewer people enrolled in Medicare Advantage,” she said, adding that the cumulative effect of all of these changes will reduce Medicare Advantage payments next year by more than 8%, or about $11 billion.
In securities filings, insurance company Humana said it expects a “mid-single-digit decline” in its Medicare Advantage benchmark payment rates, changing course from its earlier estimate that benchmark payment rates would be “flat or slightly down.” Meanwhile, shares of the Louisville, Ky.-based company dropped more than 6% immediately after the news, while insurance companies UnitedHealth Group, Health Net and Cigna Corp. also saw their shares fall.
AHIP responded in part by issuing a report from its research and policy center that emphasized how low-income and minority Medicare beneficiaries count on Medicare Advantage for coverage. For instance, the report noted, 28% of all Medicare beneficiaries were enrolled in Medicare Advantage plans, while 31% of African-American Medicare beneficiaries and 38% of Hispanic Medicare beneficiaries were enrolled in Medicare Advantage plans. The report also found that while 37% of all Medicare beneficiaries had incomes of $20,000 or less, 41% of Medicare beneficiaries with Medicare Advantage coverage had incomes at that level or below.