Medicare Advantage and Health Care Reform

A senior asked me the other day if Medicare Advantage was going to leave her state. I am not sure exactly what precipitated her question, but it is indicative of the great concern Medicare beneficiaries have that the Health Care Reform bill contains many cuts to the Medicare program to “pay for,” in terms of budget neutrality, the huge costs of that bill. And the single largest cut is in payments to Medicare Advantage plans. A Congressional Budget Office paper estimates the projected ten year reduction in dollars to Medicare Advantage (Part C) plans will be some $132,000,000,000 ($132 billion, that’s a lot of zeros!).

In fact, what surprised me is that the same paper projects that fewer Medicare beneficiaries will be enrolled in Medicare Advantage as the years go by. Again, the gurus at CBO project that enrollment will decrease from the current almost ten and a half million beneficiaries to just over nine million beneficiaries in 2019!

I told the senior that I wasn’t very good at predicting the future, but in the last big reduction in Medicare Advantage payments, which occurred in the very late 1990s, some states were indeed left bereft of any Medicare Part C Plans. In fact, I recall vividly at a meeting in New Hampshire in 1999 where a beneficiary complained bitterly that this was the third year in a row that his Medicare Advantage plan left Medicare program, and now the very last one in the state was leaving. And whether that will happen in this cycle of reduction I just don’t know. One of the big thrusts of the Health Care Reform bill is to better coordinate care and improve its quality, and managed care is a natural setting for this. So I doubt that in the long haul Congress will allow Medicare managed care plans to completely disappear from any state.

But what will clearly happen is that fewer managed care plans will stay in the Medicare business. And I find this unfortunate because I have counseled many beneficiaries to join Medicare Advantage plans. And particularly so where the beneficiary is in tight economic circumstances, but not so tight as to be able to qualify for a Medicare Savings Program which would pay their coinsurance and deductibles. Many of these beneficiaries simply can’t afford a Medigap policy, and they get pretty good protection with certain Medicare Advantage plans. This is especially true as their co-payments are generally limited and they get annual catastrophic protection, which you don’t get in regular Medicare.

As Plans drop out from year to year, these beneficiaries will have to become adept at searching for a new one that gives them a good deal with their medical expenses and yet one which their doctors and providers will accept. It will be really important for them to do their homework and to talk to a SHIP (State Health Insurance Assistance Program) counselor in the Fall to make sure they are in the best Plan come each January.