Reversing Course on Medicare Advantage Plans

Recently we reported that the Centers for Medicare and Medicaid changed their rules on reimbursing insurers for Medicare Advantage. By tweaking the formula, they reduced planned reimbursements by about 2.3%.

That didn’t last long. The CMS reversed course after a few days and apparently turned the cuts into a reimbursement increase. Though not everyone agrees that the new reimbursement amounts to an increase. Here’s another view.

What’s interesting is that the first article linked to attributes the turnaround to heavy lobbying by insurers and says insurers are a formidable lobbying force when they decide to use all their resources. This verifies something I was told a few years ago. After Obamacare was enacted, I met with a retired gentleman who used to be a hospital executive and did some consulting with a national association. I asked if I was reading the new law correctly when I concluded that it did nothing to reduce or contain costs. He agreed. He said the deal made in Washington was that the hospitals and insurers would stay out of the debate if the first round of Obamacare focused only on increasing enrollment and all cost reduction efforts were left for another day.

Whatever the background, the important point is that the 28% or so of Medicare beneficiaries who like their Medicare Advantage plans can keep them for at least another year without reduced benefits or higher costs.

CMS’s actuaries have never taken kindly to being told what to do — especially at their own jobs. Former Chief Actuary Rick Foster butted heads with the Bush administration over the Medicare Part D program and with the Obama administration over estimates on early drafts of the health reform law.

The regulation issued Monday says the CMS Office of the Actuary “has been directed by the secretary to use this assumption” that the “doc fix” will become law, even though that “conflicts with the Office’s professional judgment.”

Sebelius’s interference can also be viewed as the secretary making big, aggressive moves — a potential sign that she’s willing to interpret laws as aggressively as possible. That could be welcome news to Democrats who will want her to apply similarly liberal interpretations throughout the health reform law.