Insurers seek to bolster MA plans

September 11, 2014

Looming rate cuts and policy changes fuel grassroots effort

Wechsler The threat of future funding cuts, added taxes, stricter provider network rules and reduced quality bonuses have spurred new efforts by insurers to highlight the value of Medicare Advantage (MA) plans to legislators and policy makers. This strategy succeeded last spring in pressuring the Centers for Medicare and Medicaid Services (CMS) to back off on some of the proposed reductions in payments to MA plans for 2015. But the potential for even more sweeping program changes has expanded industry efforts to seek broader support for private Medicare plans. 

Insurers are encouraging seniors to send pro-MA messages to members of Congress running for re-election in the November mid-term elections. The Coalition for Medicare Choices, established by America’s Health Insurance Plans (AHIP), is praising MA backers, while putting pressure on legislators that back Obama administration efforts to implement the $200 billion in funding cuts (over 10 years) authorized by the Affordable Care Act (ACA). 

MA plans have gained popularity in recent years, now offering lower premiums and added benefits to more than 15 million enrollees (30% of Medicare patients). Plans emphasize that they provide added value to seniors through more coordinated care of chronic conditions and preventive services.

Uncertainty over future funding makes it difficult for insurers to make long-term investments in the program. The scheduled expiration of the CMS Star rating demonstration will further reduce plan payments, while an added tax on health plans implemented this year will boost the cost of MA
coverage by $3,590 per enrollee over 10 years. Changes in the CMS risk adjustment model also may reduce reimbursement for certain treatments for chronic conditions.

Financial reprieve

The potential for avoiding significant Medicare rate cuts in the coming year was bolstered by the recent good news from the Medicare Trustees on the program’s improved financial picture. The Trustees’ annual report, released in August, indicated that the slower rise in healthcare spending postpones by several years (until 2030) when Medicare runs into serious financial difficulties. This year’s estimate is more credible, as the analysts assumed that Congress will never implement authorized reductions in doctor payments. 

Insurers are quick to claim some credit for the spending slowdown, noting that better care management keeps patients out of hospitals and avoids ineffective treatment. Yet, most analysts point out that Medicare still faces a significant funding shortfall in the near future, and that serious action is needed to salvage the program. Republicans have proposed to shift Medicare entirely to private plans; Democrats prefer rate reform for plans and providers and tighter program regulation to prevent fraud and abuse. 

At a hearing in August before the House Ways and Means Committee, insurers emphasized the valuable services that MA plans provide to minorities and low-income seniors. The industry also called for greater transparency and more input in the complex CMS process for calculating MA rates. 

A number of controversies cloud the program. Recent analysis by Health and Human Services experts criticizes MA plans for overstating the ill health of members in order to boost CMS payments. A hot issue is whether “high-value provider networks” ensure quality care while enabling plans to control costs-or harm patients by denying them access to desired providers. The debate will not be resolved any time soon, providing an opportunity for insurers to further demonstrate the value of private Medicare plans.