When the Centers for Medicare & Medicaid Services proposed, in mid-February, an additional 2.3 percent cut to the rates it pays private insurers for running Medicare Advantage plans in 2014, the reaction from America’s Health Insurance Plans (AHIP) was swift, comprehensive and sustained.
Since then, AHIP has commissioned a study by consulting company Oliver Wyman on the economic impacts to seniors of the proposed cuts, launched a social media campaign on Twitter and Facebook and even produced a television commercial that is running in selected markets across the country. All carry the same message: if allowed to take effect, the cuts would raise costs and decrease benefits for seniors in MA plans, and in some cases may cause significant disruptions should some insurers decide to exit the market.
The campaign is aimed at coalescing opposition to the proposed cuts, and put pressure on CMS to reconsider its position before issuing its final payment rate rule on April 1.
In a press briefing in March, Karen Ignagni, president and CEO of AHIP said the proposed payment reductions would be a “crushing blow” to 14 million people currently enrolled in Medicare Advantage plans, a number that represents roughly 28 percent of all seniors enrolled in Medicare.
“The combined effect of the ACA cuts and new proposed payment changes will likely result in seniors facing higher out-of-pocket costs, reduced benefits and fewer healthcare choices,” Ignagni said.
AHIP commissioned New York-based industry consultant Oliver Wyman to conduct an analysis of the potential effect the cuts would have to people enrolled in the program and found that, on average, beneficiaries would absorb anywhere from $50 to $90 per month in either reduced benefits, higher premiums or a combination of both.
“Almost all counties will see reductions, thus the changes will likely effect most beneficiaries, and those utilizing service the most will likely see the worst in the reduction of benefits as the (cuts) will hit them the hardest,” said Glenn Giese, principal at Oliver Wyman, during the briefing.
In total, when combined with other cuts already anticipated in 2014 as a result of health reform, the Oliver Wyman report projected a decrease in payments to Medicare Advantage plans of between 6.9 percent and 7.8 percent.
Other industry groups have also expressed concern over the cuts saying they would have an adverse effect on the healthcare provided to seniors.
“The California Association of Physician Groups is deeply concerned about proposed cuts to Medicare Advantage,” said CAPG president and CEO Donald Crane in a statement. “These proposals are short-sighted and, if enacted, will have long-term negative consequences for care delivery in California and across the country.”
The proposed rate cuts were similarly panned at the bipartisan Partnership for the Future of Medicare. “Such an action is disruptive to the system, driving more beneficiaries to the unreformed fee-for-service model that will in no way help improve the health of beneficiaries or the long-term sustainability of Medicare,” read a blog post on the PFM website from co-chairs Douglas Holtz-Eakin and Kenneth Thorpe.
According to Robert Zirkelbach, spokesman for AHIP, if the cuts are enacted, it is likely that many insurers currently offering MA products will be forced to reassess their participation in the program.
“We are talking about an 8 percent reduction in payments next year,” Zirkelbach said. “Washington can’t cut the program that much and not expect seniors to be harmed. The money has got to come from somewhere.”
According to an investor letter from Citi managed care analyst Carl McDonald, issued shortly after the CMS proposal, the effect of this rate cut could be profound. He noted that the cuts could potentially turn most MA plans unprofitable and “if implemented, these rates and the program changes CMS is suggesting would be enormously disruptive to Medicare Advantage, likely forcing a number of smaller plans out of the business and creating disarray for many seniors.”
Payments to private insurers who run Medicare Advantage plans have been a regular target of some members of Congress because they exceed the per-beneficiary costs of regular fee-for-service Medicare. Yet, despite the many critics of the proposed MA cuts, congressional leaders have been largely silent.