Side Effects: Medicare Advantage Gains Won’t Last
Kathryn Nix / Alyene Senger /
Health and Human Services Department (HHS) Secretary Kathleen Sebelius
Last week, the Centers for Medicare and Medicaid Services (CMS) announced that average premiums in Medicare Advantage (MA) for 2012 have fallen by 7 percent, and enrollment has increased by about 10 percent. This is great news for the program, which allows seniors to receive Medicare benefits through a private plan of their choice. But in a serious twist of logic, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius credited Obamacare with MA’s success: “Now this is just one of the ways the Affordable Care Act is making stronger and more sustainable Medicare for years to come.”
Make no mistake about it: These claims from the White House are little more than a cheap political ruse. First of all, as Heritage research shows, Medicare Advantage was offering higher-quality care and better outcomes than traditional fee-for-service Medicare well before Obamacare became law. A previous Heritage blog explains, “The advantages of (MA) stem from the competition it allows among private health plans. Private plans are able to produce more efficient, better quality health care for beneficiaries.”
Second, those in the White House use this year’s lower premiums to discount conservatives’ warnings that Obamacare’s cuts to Medicare Advantage would threaten the program by increasing premiums, reducing benefits, and lowering enrollment. The catch is, these cuts haven’t kicked in yet. Obviously, you cannot cut a program by $145 billion and expect there to be no consequences. Medicare’s own chief actuary estimated that by 2017, MA enrollment will decline by 50 percent as a result. Writing for Heritage, Jim Capretta and Robert Book show the impact to seniors by region, which shows:
Phased in between 2012 and 2017, the MA cuts will substantially restrict the ability of Medicare beneficiaries to choose the health plans that best meet their needs and will result in substantial reductions in coverage for many millions of seniors and disabled Americans.
The fact that premiums fell this year in no way disputes that this will be the future of Medicare Advantage under Obamacare, since the health law’s payment reductions won’t even be fully enacted until years down the road. Indeed, cuts were scheduled to begin this year, but the White House eased their blow in an election year. As part of a temporary demonstration program, Obamacare had allocated approximately $7 billion in funding for bonuses for the highest-performing MA plans. HHS used the funds to award bonuses to hundreds of plans, which, as health policy expert Robert Laszewski describes, led to “a ‘Lake Wobegon’ moment,” effectively cancelling out the impact of lower payments:
They took $6.7 billion intended to be paid as bonuses to the highest quality plans under the new health law and instead declared just about all of them “above average” or better and infused those billions among almost all Medicare Advantage contractors, further improving their bottom lines.
Once the Obamacare cuts to Medicare Advantage are actually implemented and fully phased in by 2017, their damaging effects will be obvious. For now, the Administration’s claims that it somehow saved or strengthened Medicare Advantage are laughable; as Laszewski puts it, the left has done little more than “take credit for a popular program [they] really want to kill.”