Medicare Advantage cuts will drive up premiums, reduce benefits, report finds

Seniors and people with disabilities enrolled in Medicare Advantage plans will face higher premiums, reduced benefits, and loss of coverage options if new Medicare Advantage cuts proposed by the Obama administration take effect next year, according to a new analysis by Oliver Wyman prepared for America’s Health Insurance Plans. 

AHIP has been pushing back hard against proposed cuts to the program in the last week, and commissioned a study to examine the cuts in-depth.

The report by consulting firm Oliver Wyman estimates that the new proposed payment cut—combined with the reform law’s payment cuts and taxes—will result in benefit reductions and premium increases of an average $50 to $90 per month for a typical Medicare Advantage beneficiary next year.

“The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare,” AHIP President and CEO Karen Ignagni said in a statement. 

CMS recently proposed a 2.2 percent reduction in Medicare Advantage payments for 2014 at a time when medical costs are projected to increase by three percent.  It’s the lowest growth rate in the history of the Medicare Advantage program, and is far below the 2.8 percent increase in payment rates for 2013, AHIP says.

The new report found that the combined effect of the changes included in the PPACA and the new payment cuts proposed by CMS will result in an estimated 6.9 to 7.8 percent cut to Medicare Advantage plans in 2014.

The PPACA's new health insurance tax starts in 2014, and Oliver Wyman previously estimated that this tax alone will result in seniors facing $220 in higher out-of-pocket costs and reduced benefits next year and $3,500 in additional costs over the next ten years.  

Ignagni said previous rounds of payment cuts have driven seniors out of the Medicare Advantage program. The report also projects that individuals with lower incomes and those more likely to need medical services will be particularly adversely impacted by these cuts.

Medicare Advantage is the part of Medicare through which private health plans provide comprehensive medical coverage to seniors and other Medicare beneficiaries. More than 14 million Americans—or roughly 28 percent of all Medicare beneficiaries—are enrolled in a Medicare Advantage plan because of the good services, high-quality care and additional benefits these plans provide, AHIP says.

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