Legislative Update: July 2014

Legislative Update: July 2014

Are Higher Costs Coming For Medicare Advantage Enrollees?

By Jessie Gibbons, Legislative Assistant

Back in February, officials from the Centers for Medicare and Medicaid Services (CMS) estimated that Medicare's private alternative that covers almost 30 percent of seniors – Medicare Advantage – would receive a 1.9 percent cut in payment rates next year.  Private insurers and lawmakers alike were outraged by the estimate, saying the cut would result in benefit disruptions for millions of elderly enrollees.  They launched a lobbying campaign that some believe succeeded, but others feel fell short.

The final 2015 payment rate – a 0.4 percent increase – was announced by CMS in April, and many lawmakers rejoiced.  Sen. Charles Schumer (NY), for example, stated: "This proposed cut would have been disproportionate, hurting seniors who would lose doctors or pay more.  We're glad the administration heeded our call and reversed the policy."

Medicare Advantage insurers, however, remain concerned about next year's payment rates.  They say that when all aspects of payment policy are considered, they expect to see an overall payment reduction ranging from 3 to 6 percent.  Payment cuts of that degree could have major impacts on enrollees, especially since Medicare Advantage plans received a 6 percent cut in payment rates in 2014.

Following the announcement, John Gorman, Chairman of the Gorman Health Group, stated: "There will be some benefit cuts and increased out-of-pocket costs, just much less than expected."  Similarly, Karen Ignani, President of America's Health Insurance Plans, predicted that the 0.4 percent rate increase would "help mitigate the impact on seniors," but that the quality and costs of coverage may suffer due to the "year-over-year cuts."

So what can Medicare Advantage enrollees expect next year? First, they could see shrinking doctor networks. Last year, private Medicare plans including UnitedHealth – the largest Medicare Advantage plan provider – began dropping thousands of doctors from their networks in order to deal with increased funding pressure from the federal government.  Enrollees in this boat will either have to find new doctors, pay more to see out-of-network physicians, or switch to plans with better networks.

Enrollees may also begin to see more "fifteen minute or less visits" with their doctors due to the strain on provider networks, combined with an increase in newly insured individuals seeking care through the Affordable Care Act. Shorter, more rushed visits may jeopardize doctor-patient relationships and result in lower quality medical care.

Finally, Medicare Advantage enrollees could see increased out-of-pocket costs next year.  Private insurance executives have said these could come in the form of higher premiums, deductibles, and copays.  Higher costs could be particularly harmful for seniors next year since Social Security benefits are expected to rise only marginally, with an estimated cost-of-living adjustment of just 1.5 percent.

To avoid excessive cost increases next year, seniors enrolled in Medicare Advantage should be diligent about examining their plan offerings this fall.  Information about 2015 plans will be released in early October, and the open enrollment period lasts from October 15th until December 7th.  In the meantime, The Senior Citizens League will continue to monitor the issue and express its concerns to lawmakers on Capitol Hill.