House Committee Examines Status of Private Medicare Health Plans

Enrollment Increases Despite Cuts in Payments

The House Ways and Means Committee held a hearing recently on the current status of private Medicare health plans under the Medicare Advantage (MA) program (Part C). Recent data from the Centers on Medicare and Medicaid Services (CMS) indicates that there are currently over 13.5 million Medicare beneficiaries enrolled in private health plans, representing more than one in four Medicare beneficiaries (27 percent). CMS projects that enrollment will grow by 11 percent in 2013 and by 28 percent over the period 2011 to 2013.

According to the Congressional Budget Office (CBO), the Affordable Care Act (ACA) (H.R. 3590; P.L. 111-148) will cut $308 billion from the Medicare Advantage program over ten years, $134 billion in direct cuts to MA payments and the rest from indirect cuts resulting from reductions in Medicare spending. In 2011 CBO predicted that as a result of the MA payment cuts, enrollment in MA plans would be reduced to 9.1 million in 2019, rather than the 13.9 million that had been estimated without the new formula.

How to explain why MA enrollment is growing rather than shrinking as had been predicted? The CMS Administrator says the increase is due to a competitive marketplace and CMS’s management of the program. Republicans, who condemned the ACA cuts in MA plan payments, argue that the impact of the scheduled cuts to MA payments has not been felt because CMS has implemented a bonus payment program to high quality MA plans that has temporarily offset the cuts. Also only a small percentage of the scheduled cuts has been implemented thus far.

Marsha Gold, a senior fellow at Mathmatica Policy Research, testified that MA plans are paid considerably more than for a similar beneficiary in the traditional Medicare program. In the past MedPAC found that MA payments were 114 percent of traditional Medicare spending; in 2012 MedPAC found that payments had declined to 107 percent of traditional Medicare.

Gold argued that with so much concern about the federal deficit and debt, it is difficult to see the rationale for paying more for private plans. Paying more for private plans, she points out, is effectively a tax on enrollees in traditional Medicare because their Part B premiums increase with no gain in benefits to them. The original concept was to pay them less, she said, generating savings for Medicare and additional benefits for beneficiaries through greater efficiency.

There are reports that most MA plans do not provide a home health benefit fully equivalent to traditional Medicare. One satisfaction survey found that home health beneficiaries in private Medicare plans were the least satisfied of MA enrollees. Some believe that MA plans have financial incentives to avoid enrolling the high cost chronically ill population that are most likely to need home health care.

HCAF and The National Association for Home Care & Hospice (NAHC) have long advocated that MA plans should not be paid more than traditional Medicare and should have to provide home health benefits equivalent to traditional Medicare. HCAF and NAHC support requirements that MA plans include mechanisms to preserve consumer choice, ensure easy access to needed services, require and enforce quality assurance standards for all providers, ensure payment rates that recognize the costs associated with high-quality care, allow individuals to challenge adverse decisions, promote fair marketing practices, and provide adequate appropriate consumer education.

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