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Q. I keep hearing rumors that the federal government will stop reimbursing Medicare Advantage plans in a year or two and people insured under these plans will have to look for new insurance. What do you know about this matter?
A. Variations of this question arrive in my mailbox on a regular basis. This rumor is not true. Medicare Advantage is not being eliminated. In fact, since the Affordable Care Act was signed into law in 2010, enrollment in these plans has risen from 24 percent of all Medicare beneficiaries to 28 percent. Not only that, but the quality of the plans available to consumers is going up.
"There's nothing in the law that cuts back the Medicare Advantage program in the sense of changing what plans are authorized," explains Marsha Gold, Sc.D., a senior fellow at Mathematica Policy Research, a Washington, D.C., research group, and an expert on Medicare. "The only thing that's changing is the cost. The plans had been getting paid a lot more than the traditional Medicare program, and the Affordable Care Act is slowly trying to reduce that."
Here's what's going on. As of 2010, these plans, run by private insurance companies, were getting paid about 9 percent more per enrollee than original Medicare, which in turn cost the Medicare program an extra $8.9 billion that year, according to a new report from the Commonwealth Fund, a New York-based health policy research group. "Everyone was paying higher Part B premiums to subsidize extra benefits for one in four beneficiaries," says David Lipschutz, policy attorney at Center for Medicare Advocacy in Washington, D.C.
The Affordable Care Act is in the process of phasing out these overpayments until, by 2017, Medicare Advantage plans will, on average, be getting paid about the same as original Medicare costs.
But rather than roll back payments to all plans willy-nilly, the law takes a more delicate approach. For instance, it cuts funds for the plans that were getting the highest overpayments more severely than plans that were doing a better job containing costs. And it has also instituted a bonus system that awards extra money to plans with higher scores on quality of care and customer service.
Judging from the plans available for 2013, this process is working. In 2013, people on Medicare will have access to 127 plans with the top ratings of four or five stars, compared with 106 such plans in 2012, according to Medicare officials.
Should you be worried that Medicare Advantage plans will economize by reducing your benefits? "The plans are required to provide all Medicare benefits, so there's no way they can cut them," Gold explains. That includes the free preventive services added to Medicare by the Affordable Care Act. And Advantage plans that include a drug benefit are closing the doughnut hole just the same as stand-alone Part D drug plans. The only area where plans can even consider cutting back are for optional services such as dental and vision benefits, but the plan finder on Medicare.gov still features plenty of plans that have these bonus features.
For more information, see our Health Insurance Buying Guide as well as rankings of health insurance plans.
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Sources
The Impact of Health Reform on the Medicare Advantage Program: Realigning Payment with Performance [Commonwealth Fund]
People with Medicare have more high quality choices. [U.S. Department of Health and Human Services]
