Is What I Hear True?

I heard that...

..healthcare reform will take away the benefits and covered services offered in my Medicare Advantage Plan. Is that true?

The Patient Protection and Affordable Care Act (PPACA) includes cuts to payments to Medicare Advantage Plans. Medicare currently pays about 14% more for premiums for people in Medicare Advantage Plans that it does for people in traditional Medicare. It's possible that the private insurance companies that offer Medicare Advantage Plans will change the benefits they offer. However, the basic Medicare services and benefits will stay intact.

 

Finding cost-savings in the Medicare program is a significant way to control spending. These savings primarily come from the “Medicare Advantage Plans.”  Since 1997, Congress has paid for private insurance plans for Medicare beneficiaries, boosting payment rates for the plans in three separate pieces of legislation (Kaiser, 2003).  In 2009, all Medicare beneficiaries have access to a Medicare Advantage (MA) plan.  About 23% of Medicare beneficiaries across the country are enrolled in an MA plan (Morgan, 2009). This percentage varies by county.

The Medicare program pays the premiums for Medicare beneficiaries to enroll in MA plans.  MA plans can be Health Maintenance Organizations (HMOs), local or regional Preferred Provider Organizations (PPOs), or private, fee-for-service (FFS) plans. 

MA plans must offer all basic benefits from Medicare Parts A and B, except hospice (Morgan, 2009).  In 2009, 84% of MA plan enrollees also had prescription drug coverage in place of Medicare Part D prescription coverage (Kaiser, 2009). Most local HMO and PPO MA plans limit provider choice in ways that regular Medicare does not.  Also, joining an MA plan makes it impossible to use supplemental Medigap insurance, However, many MA enrollees do not need Medigap policies because the extra MA benefits are much like Medigap benefits. 

The most common MA benefit for enrollees is reduced out-of-pocket payments for services. Additional benefits, such as vision or dental benefits, and Part D enhancements are offered by some plans.  There may also be reductions in the Part B or Part D premiums (Medicare Payment Advisory Commission, 2009).  The private insurance companies that offer MA plans can change these extra benefits on an annual basis, just as any private insurance plan can change.

The PPACA's goal is to save money by reducing the cost of MA plans. Medicare pays MA plans more per enrollee—on average 14% or $103 per month—for premiums compared to what Medicare spends on beneficiaries in traditional Medicare.  For every $1.00 in extra benefits (that is, benefits beyond the traditional Medicare benefits) that MA plan enrollees use, Medicare pays the MA plans (Medicare Payment Advisory Commission, 2009):

Supporters of reducing MA plan payments to insurance companies believe that it is both too costly and unfair for Medicare to pay more for people who are covered by MA plans than for people covered by traditional Medicare.  They also believe that too little of the money Medicare pays for the extra benefits is spent on the enrollees. Current traditional Medicare beneficiaries and all future beneficiaries are subsidizing higher payments to the MA beneficiaries, which depletes Medicare funds for everyone. Supporters of reducing MA plans payments think that most MA plans can cut their costs without cutting benefits or raising premiums, and that the extra money is not being well spent. 

PPACA is cutting MA payments to insurance companies are reduced over time, some insurance companies will have to choose among:

• cutting their MA-related profits,
• cutting the extra benefits they offer (they are not allowed to cut any of the coverage that is included in traditional Medicare),
• raising premiums, or
• not providing MA plans altogether

However, MA plans may receive bonus payments based on the quality of their plans. Any of these could adversely affect enrollees in MA plans. If insurance companies stop offering MA plans or the plans become too expensive, enrollees will have to go back to being traditional Medicare beneficiaries. 

 

Sources

Kaiser Family Foundation.  2010.  Kaiser Medicare Breif.  www.kff.org/Medicare/2052.cfm.

Kaiser Family Foundation.  2009.  Medicare Advantage Fact Sheet.  May. www.kff.org/Medicare/2052.cfm.

Medicare Payment Advisory Commission (2009, March).  Report to the Congress: Medicare Payment Policy. Available at: http://medpac.gov/chapters/Mar09_Ch03.pdf

Morgan, Paulette C.  2009.  Medicare Advantage Plans.  Congressional Research Service, R40374.  March 3.  http://opencrs.com/document/R40374.

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