Republicans, Democrats differ on how to cut Medicare Advantage payments

Payment cuts to Medicare Advantage plans are on the horizon, but Democrats and Republicans disagree greatly on how those cuts will affect beneficiaries.

In the recent past — from 2010 to 2012 — payments to Medicare Advantage plans were at least $3.2 billion higher than they should have been, the Government Accountability Office (GAO) said Monday in a report requested and released by Democrats. The GAO recommended the Centers for Medicare and Medicaid Services (CMS) take further steps to improve the accuracy of risk-adjustment scores.

While those steps may still be an option, Democrats also tout pending cuts to Medicare Advantage plans in the Affordable Care Act (ACA) that they say represent overpayments to the managed care plans that participate in the Medicare Advantage program. Obama’s signature health law will reduce payments to Medicare Advantage plans by more than $300 billion over a decade as a way to pay for implementing the law.

“The Affordable Care Act reined in overpayments to private plans, but this report makes it clear that there is more to be done,” Rep. Sander Levin (Mich.), the top Democrat on the House Ways and Means Committee, said in a statement. “As we continue to look for opportunities to eliminate waste, fraud, and abuse in Medicare and pay for physician payment reform, payment accuracy should be one of the first steps we take.”

Levin also noted that “While a more accurate adjustment would increase payments for some beneficiaries, it would decrease payments for others.”

CMS pays the private health insurers that administer Medicare Advantage plans a predetermined amount per beneficiary, adjusted for health status. However, Medicare Advantage plan administrators have been criticized for exaggerating the health status of their patients in order to recoup more money from CMS.

Meanwhile, Republicans maintain that the cuts to Medicare Advantage plans mandated by the ACA will cause decreases in benefits and increased cost-sharing, and they may lead providers to withdraw from the program, all of which will increase the number of beneficiaries who drop out of Medicare Advantage.

They point to a report from the Medicare Chief Actuary that projects patient enrollment to be cut in half by 2017 when the ACA’s cuts are fully implemented.

“While the president promised that Americans could keep the health plans they liked, we are concerned that the combined effects of these policies will jeopardize beneficiary access to the Medicare Advantage plans of their choice,” the Republican heads on the Senate Finance, House Ways and Means, and House Energy and Commerce committees stated late last week.

The letter they sent Thursday to Acting CMS Administrator Marilyn Tavenner outlined their concerns with how the pending cuts are being implemented and sought CMS’s response to them. These concerns included lack of transparency by CMS, artificially optimistic assumptions about physician payment rates, confusion caused by delays in issuing regulations related to the cuts, and limiting patient choice with arbitrary price controls.

The lawmakers also cited a report released last week by America’s Health Insurance Plans (AHIP) that showed the effects of CMS’ proposed 2.3% reduction in Medicare Advantage payments for 2014. That would be on top of the cuts already slated under the ACA.

Seniors can expect to pay $50 to $90 per month more in premiums under the proposed cuts, according to the AHIP report. The health insurance trade group painted the rise in premiums as devastating, noting 41% of seniors enrolled in a Medicare Advantage plan had an annual income of less than $20,000.

Political bickering over the Medicare Advantage cuts is nothing new to Washington.

Republicans tried to characterize the cuts in a negative light throughout last fall’s election season.

Meanwhile, the Obama administration has asserted that the Medicare Advantage program is strong since the passage of the ACA. Officials said premiums have fallen 10% and enrollment jumped 28% since the law was passed in 2010. Furthermore, the number of plan choices will increase by 7% in 2013, with monthly premiums projected to increase by an average of $1.47.

On the other side, Republicans have noted that only a small fraction of the Medicare Advantage plan’s cuts — 4% — have taken effect so far.

Paul King and Charlotte Hildebrandt
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