Medicare Advantage Plans grow amid pay cuts by the Obama Administration

Although complaining about the proposed cuts to Medicare Advantage plans, more private insurance companies are entering the government health program to offer health services to seniors.

The healthcare insurance industry is in a tizzy over the Obama administration’s proposal to cut payments to Medicare Advantage plans in 2014, with reports claiming a cut by as much as 8 percent in payments will lead to higher premiums and less access to the plans. However, the numbers tell a different story.

Health insurer applications to the Medicare Advantage progam are up by as much as 50 percent.  The most recently available statistics from the Centers for Medicare & Medicaid Services (CMS) shows 48 Medicare Advantage applications for 2013, compared to 31 application for the 2012 plan year.

Application figures are based on the parent companies, not the actual health plans provided. In 2012, there were just over 3,500 Medicare Advantage plans available across the country. The 2013 plan year saw 200 additional health plans in the face of CMS weeding out low quality plans.

The growth in plans is being fueled by demand, as the number of seniors entering the private insurance market continues to grow.  Health plans are responding to the business opportunity from the growing population of aging baby boomers.

The industry sees the budget cuts as harmful to the growth of the Medicare Advantage business. “The proposed changes to Medicare Advantage payments are a crushing blow to the millions of seniors and people with disabilities who count on this critically important part of Medicare,” said Karen Ignagni, America’s Health Insurance Plans president and chief executive.

Still, industry observers believe that health insurers will more than make up the revenue lost from payment cuts on the sheer volume of seniors enrolling in Medicare Advantage plans.  With Medicare Advantage enrollment eclipsing 14 million this year, up from 12.8 million seniors in 2012, plans have volume on their side.

CMS is quick to point out that the Affordable Care Act includes incentives that reward Medicare Advantage plans with bonus payments when they achieve established quality benchmarks and ratings.

“The Medicare Advantage program is stronger thanks to the health care law, with estimated premiums down 10 percent and enrollment up 28 percent since the law was enacted,” a spokeswoman for the Centers for Medicare & Medicaid Services said. “We are reducing taxpayer-funded overpayments to insurance companies, and giving more incentives for them to provide quality care for seniors.”

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