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Medicare Advantage Enrollees Face $515 Benefit Cut

ObamaCare imposes major cuts on the popular Medicare Advantage program, and while the Obama administration has largely delayed them until after the election, enrollees will lose an average $515 in benefits in 2013, according to an IBD analysis.

Some 14.4 million people are expected to enroll in Medicare Advantage in 2013, up from 13.1 million this year, the Center for Medicare and Medicaid Services (CMS) said Wednesday. Advantage plans are run by private firms, providing more benefits at a somewhat higher cost — usually 13% to 17% — to the government than traditional Medicare.

That added cost has made Advantage plans a target. ObamaCare will cut MA by at least $7.4 billion in 2013.

ObamaCare’s Dis-Advantage

ObamaCare is expected to cut $308 billion from Advantage plans from 2013-22, based on calculations of Congressional Budget Office data. That’s a huge share of the more than $700 billion in total Medicare cuts to help pay for the exchange subsidies and other parts of ObamaCare.

So far, though, Advantage cuts are not going according to plan. The CBO estimated that ObamaCare would cut Advantage spending by about $6.6 billion this year. However, most of those cuts were restored by a “demonstration project” that CMS initiated in late 2010 that will run from 2012 until 2014.
Known as the “MA Quality Bonus Payment Demonstration”, the program is so generous in paying bonuses that about 90% of Advantage enrollees are in a plan receiving a bonus, according to an April Government Accountability Office report. The report noted that the bonuses would be enough to offset 71% of planned MA cuts in 2012. The GAO also stated that the demonstration project “dwarfs all other Medicare demonstrations … conducted since 1995 in its estimated budgetary impact.”

Critics charged that the demonstration, officially aiming at boosting quality, is political — letting the Obama administration offset cuts to Advantage plans that would otherwise hit seniors during an election year. In July, GAO sent a letter to Secretary of Health and Human Services Kathleen Sebelius raising questions over her legal authority to run the demonstration program. She never responded.

While the administration may have delayed most Advantage cuts for 2012, the GAO noted that the demonstration project would only offset 32% of the cuts in 2013. ObamaCare is supposed to cut about $10.9 billion from Advantage plans next year, according to the CBO. That will drop to about $7.4 billion — or $515 per enrollee — with the demonstration project offset.

It is unknown how that will affect enrollees, although studies of the Advantage program before ObamaCare offer clues.

A 2007 CBO report said the extra paid to MA plans accrued “to participants in the plans in the form of supplemental benefits or lower premiums,” and reducing payments “would leave less money for those purposes.”

It does not appear that the cuts will impact premiums much in 2013. The average premium for Advantage plans will only rise $1.47 per month, or about $17.64 annually, CMS says.

That still leaves over $497 in reductions. The likeliest candidates are higher co-pays for services and cuts to additional bene fits not given by traditional Medicare. A 2009 Medicare Payment Advisory Commission study found that 61% of the added benefits in Advantage plans were reductions in traditional Medicare cost-sharing for hospitals and physician services. Another 21% went to additional benefits like vision and dental care.

Cutting these areas would mean higher out-of-pocket costs for Advantage enrollees.