Obama administration reverses proposed cut to Medicare plans


Daniel Acker/Bloomberg

Medicare has reversed proposed payment cuts to private heath plans in the popular Medicare Advantage program for the second straight year amid strong pushback from health insurers and Capitol Hill.

The Centers for Medicare and Medicaid Services on Monday, after proposing in February a 1.9 percent cut to private plans, said government payments to insurers in the Medicare Advantage program will increase .4 percent on average in 2015. The increase, CMS said, is slightly higher than what insurers had requested.

"That gives us great confidence with this final rate structure we'll continue to see a strong program," said CMS principal deputy administrator Jonathan Blum.

The reversal comes after a major lobbying effort from the health insurance industry and signals that Republicans would use the cuts to attack Democrats in this year's midterm elections. The Medicare Advantage program, according to the Avalere Health consulting firm, now covers about 16 million seniors, or 30 percent of all Medicare beneficiaries, through private health plans that can offer extra benefits, like wellness plans.

CMS says it reversed the proposed cuts after reconsidering several factors. The agency had initially assumed Medicare’s growth rate would be -1.9 percent. Now it says that rate would be -3.4 percent, which actually would have lowered payments to health plans.

But because of various changes to how Medicare assesses risk, health plans will instead see higher payments, the agency says.

Medicare pays private insurers more per enrollee than the program pays for seniors under its traditional structure — a gap that the Affordable Care Act aims to eventually close. The president’s health-care law is expected to reduce Medicare Advantage funding by about $156 billion over a decade, according to a 2012 Congressional Budget Office projection. The health insurance industry has sharply criticized program cuts, contending that seniors will see reduced benefits and fewer health care choices as a result.

Medicare Advantage cuts required by the ACA started in 2012, and despite some dire predictions, enrollment in the program increased every year since the ACA was signed in 2010. The ACA's final cuts to the program are supposed to continue each year until 2017. The average monthly premium in 2014 plans were expected to increase $1.64 to $32.60, the Department of Health and Human Services announced last September.

CMS's reversal on Monday set off fresh Republican criticism of the planned future cuts to Medicare Advantage.

"It remains clear that these cuts will negatively impact seniors who will feel the harsh realities of the [Medicare Advantage] cuts," the House Ways and Means Committee Press Office said in a statement. House Speaker John A. Boehner (R-Ohio) said the reversal "does little to address the concerns about ObamaCare’s impact on the Medicare Advantage program that millions of seniors rely on every day."  The Republican National Committee called the decision "political cover for vulnerable Democrats."

America’s Health Insurance Plans, the nation’s largest industry group representing health insurers, ran an aggressive lobbying effort last year that helped turn a proposed 2.3 percent cut for 2014 Medicare Advantage plans into a 3.3 percent raise. Insurers say other Medicare Advantage changes and cuts last year still reduced program funding by about 6 percent.

CMS justified last year's rate cut reversal largely by assuming Congress would act to avoid a major scheduled reimbursement cut to Medicare physicians, known as the “doc fix.” Congress has made 17 such patches in the past decade, including a year-long patch approved just last week. In setting 2015 rates, CMS again assumed Congress will patch Medicare physician payments after the latest extension runs out.

Insurers this year had started lobbying against the cuts earlier than ever. Their seven-figure campaign protesting expected cuts started in January, more than a month before Medicare even proposed rates.

About half of all the members of Congress, across party lines, raised concerns about the proposed cuts. A group of 40 Republican and Democratic senators, lead by Chuck Schumer (D-N.Y.) and Mike Crapo (R-Idaho), had called on CMS to maintain Medicare Advantage payment levels in 2015. Democrats had been especially fearful that the cuts would be used against vulnerable lawmakers in the November elections.

"In many parts of the country, including New York, Medicare Advantage works very well," Schumer said in a Monday evening statement. "They’ve shouldered their share already and 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.”

Even after notching Monday’s victory, health insurers say they’re still worried about further cuts scheduled to hit Medicare Advantage.

“We remain concerned about the impact year-over-year cuts to Medicare Advantage would have on the high-quality, affordable coverage millions of seniors like and rely on today,” AHIP president and CEO Karen Ignagni said in a statement.

Monday’s rate announcement comes almost a month after the Obama administration abandoned proposed changes to the Medicare prescription drug program that drew widespread criticism from patient groups, insurers and Capitol Hill. CMS scrapped proposals that would have relaxed Medicare coverage requirements for some drugs, including antidepressants, and limited how many drug plans insurers could offer in the same region.

CMS on Monday also confirmed it will end a three-year quality bonus demonstration project that protected some Medicare Advantage plans from cuts required by the health-care law.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.

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