While there's a high level of interest every year in what thenew plan designs will look like, this year is perhaps the mostanticipated in recent history.

That's because the implementation of various parts of thePatient Protection and Affordable Care Act is set to strip tens ofbillions of dollars from the Medicare Advantage program at a timewhen participation is higher than ever.

According to the Kaiser Family Foundation, more than 14 millionbeneficiaries are enrolled in these plans, accounting for more than28 percent of all Medicare beneficiaries. It's also likely thatonly a fraction are even aware that pending funding cuts couldpossibly affect their benefits in the near future.

“Many Medicare beneficiaries have no idea about the Medicarefunding cuts built into PPACA and what they could potentially do totheir Medicare Advantage coverage,” says Taylor Martin, chiefmarketing officer for Senior Security Benefits Inc. inFortWorth,Texas.

A closer look at the history of the Medicare Advantage programreveals a landscape littered with funding starts and stops thathave created considerable instability in the program over theyears.

What the future holds

Some industry veterans are worried that the result will be fewerplans available in the marketplace or that the plans stillavailable will be a harder sell.

“Agents who sell Medicare products full-time are concerned thatthe benefits reductions and premium increases will make them lessattractive to consumers,” says Clifton Stubbs, a senior brokersales executive with BenefitMall inDallas.

In fact, just after the law passed, Medicare's chief actuarypredicted that MA enrollment would decline sharply, with as many ashalf the current number of enrollees leaving private plan coverage.But despite these predictions, enrollment in Medicare Advantagesince 2010 has climbed from 11.1 million to 14.4 million in2013.

Predictions for what will happen after 2014 differ greatly. Aslarge carriers have bought up some of the smaller plans, insurancecompany stock prices have risen, giving favorable outlook to theidea that Medicare Advantage companies will find ways to cut costsand remain in the game.

The CBO now projects plan enrollment to swellto 21 million participants by 2023. Insurers have been routinelyworking through reimbursement reductions since 2010, yet enrollmenthas accelerated and the benefits have been relatively consistent.Insurers have been able to mitigate these rate cuts through variouscost savings mechanisms internally, so there's hope that they willsomehow continue that trend even in the face of further cuts.

Others predict that unless changes are made, the program willnecessarily fold in many markets. As the plans are already affectedby the 2 percent cuts resulting from sequestration, could theyreally sustain any further loss in funding under the implementationof PPACA?

If they can't, and scores of plans across the country close,it's likely that reduced plan availability would have the greatestimpact upon low-income beneficiaries, Stubbs says. Theseindividuals often can't afford a traditional Medigap policy andhave opted for the more affordable private plans. In today'smarket, it's estimated that more than 40 percent of the nation'sbeneficiaries earn less than $20,000 per year, and low-premiumMedicare Advantage plans have played an important role in providingaccess to affordable benefits. In many markets where private plans,particularly HMO plans, have no premiums, seniors with low incomeshave relied on Medicare Advantage for years to deliver affordablecopays and even some ancillary benefits, such as dental or vision,that traditional Medicare doesn't offer them. Unfortunately, whenplans go out of business or pull out of certain areas,beneficiaries get stuck with some tough choices, Stubbs explains.

“A large portion of seniors cannot afford a supplement andunless there is another advantage plan offered, they end up back onoriginal Medicare,” he says.

All the uncertainly leads us back to same central truth thathealth economists have been clamoring about for years, which isthat the Medicare program is unsustainable on its present courseand needs major reform. If original fee-for-service Medicareremains unchanged and inefficient, then it will continue to haveout-of-pocket costs that are unpredictable.

Any savings generated by PPACA's changes to Medicare Advantagewon't save enough to sustain all of Medicare long-term under anyscenario, insiders argue. More likely, any adverse effects onMedicare Advantage will further the problem by forcingbeneficiaries back into the traditional fee-for-service program,which is fraught with fraud and burdensome regulations which makeit far from cost effective. There are some unpleasant changes thatmust be made by both carriers and beneficiaries if we are to everhope for a measure that will truly solidify the availability ofMedicare for future beneficiaries.

Perhaps AHIP President Karen Ingagni said it best in her Marchletter to CMS: “To prevent the MA program from going into atailspin, the agency needs to implement a solution that will be bigenough to solve the problem.”

To be sure, there is much in front of Congress that must bedealt with even beyond private plans, such as permanent fixes forthe decrease in payments to doctors that continually get kickeddown the road by legislators. Until these deeper issues areresolved, it's anyone's guess as to whether private plans willsurvive.

The program's history

1972
Congress enacts legislation to allowhealth maintenance organizations to provide coverage for Medicarebeneficiaries, beginning a long history of private Medicare planoptions. Originally plans were paid based on the average per capitacosts of providing traditional Medicare-approved services incertain geographic locations. In some cases where per capita costswere not easy to estimate, the plans were then based on whatMedicare officials determined to be the reasonable cost ofproviding such services.

1982
Congress sets Medicare payments tothese health plans at 95 percent of traditional Medicare paymentsin each county, causing an explosion in the number of availableplans. Unfortunately, the growth was not uniform, and therecontinued to be pockets around the country where no private planoptions existed. Low-income beneficiaries living outside of urbanareas did not have the same access to the cost savings provided byprivate plans in urban areas where networks were easier toform.

1997
The Balanced Budget Act officiallynames the private plan options “Medicare Plus Choice,” butredirects some of the program's previous funding into other areasof government as part of the reconciliation of the budget. Oddlyenough, the legislation sought to increase availability of theprograms but also wanted to rein in costs by replacing the existingplans with tight networks of providers for greater costcontrol.

The result was catastrophic. By capping increases in the planpayments while at the same time growing Medicare's regulatory reachover their operations, the legislation doomed more than half of thenearly 350 plans existing at that time. Scores of plan closuresoccurred around the country, resulting in more than  amillion beneficiaries being dumped from their plans back into theoriginal fee-for-service Medicare system.

2003
As costs for traditional Medicarecontinues to skyrocket, Congress reverses some of the cuts itenacted in the late 90s. It approves additional funds for theprogram in an effort to entice private plans back into the program,which now becomes the Medicare Advantage program. Insurancecarriers respond predictably by rolling out new plan options andincreasing benefits in existing plans. Within a few short years, anearly complete reversal of the fallout that happened after the BBAoccurs, and record numbers of enrollments ensue due to richerbenefits that include disease management and care coordination.

2010
The Patient Protection and AffordableCare Act produces another shift in payment policy by reducingfederal payments to Medicare Advantage plans over time, bringingthem closer to the average costs of care under the traditionalMedicare program. In addition, the legislation requires plans tomaintain a medical loss ratio of at least 85 percent beginning in2014, restricting the share of premiums that Medicare Advantageplans can use for administrative expenses and profits. In 2014,plans also will begin to absorb a $220 per member annual premiumtax.