The Coming Medicare Advantage Cuts

Government policy for several years has been to reduce the reimbursements paid to insurers who offer Medicare Advantage plans. The plans have become very popular, now enrolling 38% of Medicare beneficiaries, according to some estimates. But the Centers for Medicare and Medicaid announced recently that the reimbursements are likely to be reduced again for 2015. The final numbers won’t be announced until April 7, and the initial announcement didn’t contain enough details for insurers to know the extent of the cuts. But there has been commentary as well as push back. Here’s a summary of the situation.

In general, cuts mean either premiums will go up or benefits will shrink. AHIP has warned payment reductions in 2015 will harm Medicare Advantage beneficiaries. The group has estimated enrollees experienced benefit cuts of up to $70 per month as well as cost increases due to last year’s cut. Another round of cuts will lead to fewer provider options, reduced benefits and higher premiums for beneficiaries, according to AHIP.

Dr. McBride agrees premiums and/or benefits will shift in response to the reduced rates. “Anytime you have the payment drop either relative to what it was or relative to what it could be, that’s kind of a no-brainer: You’re either going to have the premiums go up or the benefits go down,” he says. “That’s just going to happen. If you say that’s not going to happen, you’re not doing elementary math.”