By Phil Galewitz
Kaiser Health News, September 15, 2011
The Obama administration on Thursday said the nearly 12 million senior citizens enrolled in Medicare health plans will see their monthly premiums drop by an average of 4 percent while benefits remain stable next year.
Enrollment in the plans, which now have about a quarter of all Medicare beneficiaries, is expected to grow by 10 percent in 2012, said Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services.
He attributed the premium drop to the agency’s strong negotiations with plans as well as the companies’ continuing desire to serve the market.
Dan Mendelson, the chief executive of consulting firm Avalere Health, said plans are lowering premiums because their costs have fallen as their members have used fewer services in the midst of the economic downturn.
The plans were targeted by Democrats who complained that the government pays more per capita for beneficiaries in the private plans than it spends on those in traditional Medicare.
Federal payments were frozen to Medicare Advantage plans this year and are dropping by less than 1 percent in 2012.
The health care law softens the impact of Medicare Advantage cuts in 2012 by providing billions of dollars for quality bonuses for highly rated plans that received four or five stars in a government grading system.
In a policy shift last fall, HHS decided to lower the bar for bonuses. Average-quality plans garnering just three or three-and-a-half stars would also get bonuses, although at a lower percentage than top-tier plans.
The HHS decision means that nearly 90 percent of Medicare Advantage enrollees are in plans now eligible for a bonus. Under the tougher approach Congress took in the health law, only about 33 percent would have been in plans getting the extra payments.
Comment:
By Don McCanne, MD
The Obama administration is countering Republican claims that the Affordable Care Act stole money from Medicare. They are trumpeting the facts that Medicare Advantage premiums are 4 percent lower, and enrollment is expected to be up by 10 percent. We really need to get past the deceptive rhetoric on both sides to understand what really is going on.
The Medicare Advantage program began as a fraud. These private plans were paid 113 percent of the costs of the traditional Medicare program so that they could offer extra benefits to entice individuals away from the public program. Once a sufficient number of individuals joined the private plans, funding for the public program would be slashed and patients would flee into the private plans. Only then would the public learn that the next planned step would be to shift to a Ryan-type voucher (premium support), which would dump much more of the costs onto patients.
The Affordable Care Act included a provision to gradually reduce these Medicare Advantage overpayments. The scheduled reduction for 2012 will be less than 1 percent. But members of the Obama administration have been listening to the insurers and the Republicans. They decided that this very modest reduction might make them more vulnerable to Republican attacks as we enter an election year. So what did they do?
They replenished the reductions with billions of dollars in quality bonuses designed for top tier 4 and 5 star plans, but they expanded the program to include 3 star plans. That way, plans covering 90 percent of Medicare Advantage enrollees would receive additional payments. A quality bonus for almost every plan is nothing more than a blanket payment increase. They have preserved this gift to the private insurers and then have the gall to claim that the programs are stronger and more popular as a result of their “strong negotiations” with the plans! Strength in politics seems to be proportional to the size of the gifts of cash, especially appalling when you realize that this is our tax money.
By the way, how much is that 4 percent reduction in premiums that the Medicare Advantage enrollees will be paying? It averages about $1.48 monthly per enrollee. That tough negotiating sure hit the insurers hard. $1.48! I can picture the insurers leaving the negotiations saying that they sure were hit hard this year, but they hope to do better in next year’s negotiations, as they collapse in hysterics right after the door closes.
One more important fact to keep in mind is that these extra insurance company bonuses are paid partly by our Part B premiums in the traditional Medicare program. Those of us who refuse to join the Medicare Advantage plans are paying higher premiums to buy more patient benefits, more insurer profits and more administrative services for those who have enrolled in the private plans. We now have an official government policy that requires us to pay more and get less if we don’t privatize ourselves!
Dishonesty is so prevalent in politics today that I think I almost understand the graffiti that we saw yesterday while hiking on our ridge trail: “The truth is a lie!”