Medicare Advantage Rate Cut Could Have Been Worse

Democrats have long sought to equalize what the government spends on traditional Medicare and on the higher paid private Medicare Advantage plans, so it was perhaps inevitable that the 2015 rates announced by the Centers for Medicare and Medicaid (CMS) on Friday would contain some cuts.

The CMS press release stated that the overall rate cut to Medicare Advantage would be just under 2 percent. However, as a result of programs to tie payments to quality, the cuts to individual Medicare Advantage plan providers might be higher. Bloomberg News noted that the cut to insurers like Humana and United Healthcare would be closer to 4 percent, and the insurance industry had predicted that cuts could be as high as 7 percent.

Insurers have pointed to rate increases for Medicare Advantage members and the necessity of narrowing provider networks as ways seniors are being hurt by the Affordable Care Act’s mandate to trim over $2 billion from the Medicare Advantage program over the next 10 years. Overall, the industry is reported to have spent in excess of $1 million this year on lobbying against the cuts, and the America's Health Insurance Plans (AHIP) tradegroup specifically reminded lawmakers about the dangers of angering Medicare recipients with its “Seniors are Watching” advertising campaign. Those over age 65 tend to vote more regularly and more conservatively than other voting blocks.

However, how real the pain is has been a subject for debate. David Lipschutz, policy attorney with the Center for Medicare Advocacy, told Kaiser Health News that his group was unaware of any new trends in changes in benefits. Medicare Advantage plans remain popular with just under a third of Medicare beneficiaries now opting for them.

In addition, Wall Street seemed nonplussed about the rate cut on Monday as health insurance and many hospital stocks rose following the announcement of the cuts. Humana, the second-largest Medicare Advantage insurer, saw its stock rise 8.3 percent to a interday price of $111.16. Meanwhile, United Healthcare, the largest provider of Medicare Advantage plans, gained 2.9 percent to $75.99. In addition, the Standard & Poor’s Supercomposite Managed Health Care Index of 10 companies climbed 3.3 percent.

Last year, the initial rate cut announced was over 2 percent and it was changed to a modest rate increase by the time the final rates were published.

This year, the rates will be finalized by April 7, CMS said on its website, and the agency is accepting comments until March 7.