Q: I'm currently enrolled in a good Medicare Advantage plan and I worry about my benefits. I read that the healthcare reform law cut payments to Medicare Advantage plans. Can you tell me how that will affect my costs over the next few years?
A: Despite concerns about $200 billion in reductions to Medicare Advantage plans required by recent healthcare reform legislation, enrollment continued to increase in 2012 and premiums remained the same or even came down for many enrollees. But the future of Medicare Advantage plans is uncertain, because the vast majority of the substantial cuts won't be fully implemented until 2017.
Proponents of Medicare Advantage are warning that beneficiaries will face higher out–of–pocket costs, reduced benefits, and fewer healthcare choices in the future. Medicare's actuary has projected that enrollment in the plans will be cut in half by 2017 as plans drop out of Medicare and reduce benefits.
Historically seniors have been attracted to Medicare Advantage plans because premiums are lower than beneficiaries generally pay for Medigap supplemental policies, although out–of–pocket costs can be substantially higher than with Medigap plans. In many areas Medicare Advantage plans offer benefits beyond those covered under traditional Medicare. Plans may reduce Part D premiums, add vision or hearing benefits, or offer flat co-payments instead of co-insurance.
The effect of the cuts would be felt unevenly through the country, because additional benefits offered by the plans varies greatly by state. Seniors in a number of states (Alaska, Montana, Wyoming, South Dakota, Minnesota, New Hampshire, and Delaware) are especially at risk of losing their Medicare Advantage benefits according to a recent report from Avalere Health a health policy company.
On the other hand, other coming changes to Medicare may outweigh reductions. According to the Kaiser Family Foundation, Medicare Advantage plans may continue to grow as former employers drop supplemental coverage, and younger beneficiaries, having more experience with managed care plans come into the system. In addition, as states move to enroll seniors who are eligible for both Medicare and Medicaid into the plans as part of a new demonstration program, that could also contribute to growth in the future. With more than one quarter of all beneficiaries enrolled in the plans now, Congress may feel the need to limit or slow the speed of payment cuts to avoid disruptions.
Watch your mail this month for notices of changes in your health plan. You can compare and change plans during the Medicare Open Enrollment period October 15 through December 7. Visit www.Medicare.gov and use the "Compare Drug and Health Plan" tool.
Sources: Medicare Advantage 2012 Data Spotlight, Kaiser Family Foundation, June 2012. "Report: Healthcare Law Cuts Put Medicare Advantage Benefits At Risk In Some States," Julian Pecquet, March 12, 2012.