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Medicare Advantage Cuts, Round Two

Last update on: Feb 02 2017

Members of Medicare Advantage plans can expect a new round of premium increases or reduced benefits or both. The plans are very popular with their beneficiaries, and they’ve been growing as a percentage of the Medicare population. But the current administration in Washington doesn’t like them at all. Money put into the plans was reduced as part of the Affordable Care Act of 2010 (Obamacare). Various short-term rulings delayed any additional benefits in the election year of 2012. Now that the election is over, the new round of cuts was announced.

Be prepared to shop around for a new plan when the next open season comes around at the end of 2013. Insurers will react differently to the changes. Some likely will stop offering the Advantage plans. Others will make different combination of premium and other cost increases and coverage reductions. Some probably will accept reduced profits to avoid major changes for members. Medicare Advantage plans still are better than traditional Medicare for a number of people. You can stay in the plans until the administration finally eliminates their appeal over traditional Medicare. Then, you can switch to traditional Medicare.

Federal auditors suggested the project was illegal, but in any case it is now winding down and HHS is making up for lost time. Even as ObamaCare-mandated cuts of roughly 3.4% hit in 2014, out of nowhere HHS gamed the complex formula to conjure a new 2.2% cut in the fixed payments that insurers receive for each senior they cover under Advantage.

Folding in ObamaCare’s $8 billion tax on insurers next year that is the equivalent of a smaller subsidy, the Medicare Advantage cuts will total anywhere from 6.9% to 7.8%. Thus Advantage will become the only entitlement for which real spending will fall slightly year over year and continue to decline, even as health costs rise and more people join the program. Mr. Obama would never tolerate this in any other area of government, no matter what tool was used.

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