Insurance Industry Pushes Back Against Cuts to Medicare Advantage

America's Health Insurance Plans (AHIP), which represents the U.S. healthcare insurance industry, is pushing for the Centers for Medicare and Medicaid Services (CMS) to use every ounce of flexibility it has to eliminate cuts to Medicare Advantage before it announces the final 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies on April 7.

Compared to CMS’s cuts to Medicare Advantage payments for this year (which were around 6 percent) the cuts for 2015 seemed milder. Health insurance company stocks even rose after CMS released proposed payment rates for comment last month.

According to CMS, its 2015 rate changes could mean a 1.9 percent cut in payments for Medicare Advantage plans.

However, an analysis by consulting firm Oliver Wyman that was commissioned by the AHIP finds that total cuts to Medicare Advantage plans in 2015 add up to 5.9 percent. Furthermore, the Oliver Wyman analysis finds that this cut will make Medicare Advantage more expensive for seniors and could limit their benefits. Its estimate is that seniors may pay between $35 to $75 more per month for their plans in 2015, and the biggest change may be for low-income seniors (those living on $20,000 per year or less) who cannot easily afford even a modest increase in their monthly premium.

Because Medicare Advantage cuts are supported by Democrats — who see the higher per beneficiary costs of the private plans compared to traditional fee-for-service Medicare as waste — pushing back against the cuts is also a top Republican agenda item. Though normally happy to cut entitlement spending, for the GOP, pointing out ways the Democrats and the Affordable Care Act (which mandates the cuts to Medicare Advantage) are increasing health care costs for seniors carries a political advantage.

The Republican National Committee, National Republican Senatorial Committee and National Republican Congressional Committee issued a joint memo last week that pointed to the cuts to Medicare Advantage as one example of how Democrats are failing to protect Medicare in their zeal to advance provisions of the Affordable Care Act.

"ObamaCare robs Medicare Advantage by $156 billion," the memo reads. "Democrats from coast to coast vowed to protect Medicare, yet they continue to put a law that bleeds the program dry above the seniors they represent.”