Insurers warn of Medicare premium rise

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While details about Medicare Advantage plan options for 2014 won't be available until October, insurers are already warning that beneficiaries could see hefty increases in their monthly premiums.

America's Health Insurance Plans, a trade association in Washington, D.C., says a combination of taxes and rate cuts targeting Medicare Advantage plans could be passed on to beneficiaries who might end up paying $50 to $90 more for their monthly premiums next year.

The Centers for Medicare & Medicaid, or CMS, which will announce its finalized 2014 rates April 1, has proposed a 2.2 percent payment reduction for the plans, in which private health plans offer comprehensive Medicare coverage to Medicare-eligible beneficiaries, typically including drug coverage.

That will be coupled with $200 billion in Medicare Advantage savings by 2017 called for by the Patient Protection and Affordable Care Act, and a new tax on health insurers starting in 2014. Also in the mix is the so-called "doc fix," which could cut Medicare payments to physicians by 25 to 30 percent.

Taken together, the taxes and the rate cuts amount to close to a 10 percent reduction for Medicare Advantage plans, said Eugene Scanzera, vice president at Pittsburgh-based UPMC Health Plan, which has 110,000 members.

"A cut this big cannot be absorbed by anybody -- a health plan, a member or a group," he said.

The doc fix comes from the 1997 Balanced Budget Act that dictated that Medicare physician payments be based on factors such as overall health care costs, inflation, geographic location and the national economy.

Following that formula would have meant growing cuts in physician payments over the past decade. Congress has repeatedly stepped in with temporary "fixes" that blocked the cuts -- fixes that have also widened the gap between what the law mandates and what doctors are paid.

Although Congress has unfailingly stepped in to stop the cuts in the past, CMS sets its rates based on the assumption that the physician payment cuts will kick in, Mr. Scanzera said.

Not everyone thinks the cuts to Medicare Advantage plans are such a bad thing.

Despite the dire warnings from insurers, a national Medicare advocacy group is countering that the plans are already getting paid more than they should in a lot of ways. With billions in cuts to Medicare planned over the next decade, the responsible approach now is to bring Medicare Advantage rates in line with standard Medicare, they say.

"Don't necessarily believe the hype," said David Lipschutz, a policy attorney with the Center for Medicare Advocacy in Washington, D.C.

Medicare Advantage CMS pays Medicare Advantage plans a set amount for each of the 14 million beneficiaries, a rate adjusted based on the beneficiary's health risk status. Mr. Lipschutz noted a January Government Accountability Office report estimated there were at least $3.2 billion -- and perhaps more than $5 billion -- in excess payments to the plans in 2010-12 because of inflated health risk scores.

"The plans are making a lot of statements about how they're going to be hurt, but they also are very interested in staying in the Medicare Advantage business, and they will do what they can to stay in that business," Mr. Lipschutz said.

While there may be differing opinions on what will happen next fall, there can be little argument about the recent cost history of Medicare Advantage plans.

Bill McKendree of Apprise in East Liberty, a county program that helps seniors navigate the Medicare choices, said plan premiums started increasing two years ago.

"We've seen some significant spikes already, 10 to 20 percent in premiums and more than 60 percent for copayments. This is happening even without reducing the rate of reimbursement."

Premium increases will vary depending on beneficiaries' choice of plans, which can range from one with no deductible and limited benefits to one with comprehensive coverage.

But lately Mr. McKendree has noticed people are asking about switching to a standard Medicare plan with Medigap supplementary coverage, a more expensive option that doesn't include a pharmacy plan but is more stable.

Rather than deal with fluctuations in a Medicare Advantage plan's cost and coverage, "They're saying, 'I want some dependability. I want some predictability.' "

Although Mr. McKendree said he can't predict what happens next fall, the spike in premiums the last two years when rates were effectively frozen may be telling. If Medicare Advantage plans are hit as hard as forecast, "We're going to see these reduced subsidies passed on to the consumer in individual premiums, copayments and deductibles," he said.

"It's unfortunate and sad that the consumer is going to pay, whatever happens."

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Steve Twedt: stwedt@post-gazette.com or 412-263-1963.


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