The nearly 12 million senior citizens enrolled in private Medicare health plans will see their monthly premiums drop by an average of 4 percent while benefits remain stable next year, the Obama administration officials announced Thursday. In addition, they said, premiums fell by an average of 7 percent this year, much higher than the 1 percent the government projected a year ago.
The plans, called Medicare Advantage, are offered by health insurance companies as an alternative to traditional, government fee-for-service Medicare.
Enrollment in the plans, which now cover about a quarter of all Medicare beneficiaries, is expected to grow by 10 percent in 2012, said Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services. Blum said health plans are also lowering co-payments and deductibles.
He attributed the premium drop to the agency’s strong negotiations with plans, as well as to the companies’ continuing desire to serve the market.
Dan Mendelson, chief executive of consulting firm Avalere Health, said plans are lowering premiums because their costs have fallen as their members have used fewer services during the economic downturn.
The average Medicare Advantage enrollee paid about $39 per month in premiums in 2011, according to a report by the Kaiser Family Foundation.
Many critics of the federal health law raised fears that Medicare Advantage benefits would shrink and premiums would rise because the overhaul reduced federal payments to the plans by $136 billion for the next decade.
“Instead, we are seeing just the opposite,” Health and Human Services Secretary Kathleen Sebelius said. “Medicare plans are stronger than ever and beneficiaries continue to have access to affordable options.”
The plans were targeted by Democrats who complained that the government pays more per capita for beneficiaries in the private plans than it spends on those in traditional Medicare.
Federal payments to Medicare Advantage plans were frozen this year and are dropping by less than 1 percent in 2012. Larger payment drops are expected to kick in later this decade.
The health-care law softens the effect of Medicare Advantage cuts in 2012 by providing billions of dollars for quality bonuses for highly rated plans.
America’s Health Insurance Plans (AHIP), the industry trade group, said it stands by its predictions that program will soon run into trouble as a result of health law funding cuts.
“As these cuts take effect in the coming years, Medicare Advantage beneficiaries will face higher out-of-pocket costs, reduced benefits and fewer health-care choices,” AHIP spokesman Robert Zirkelbach said.
Open enrollment in Medicare Advantage plans starts Oct. 15, a month earlier than in past years. It will run through Dec. 7.
KHN correspondent Christopher Weaver contributed to this report.
Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.