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Despite Health Law Cuts, Medicare Advantage Enrollment Stays Strong

By John Reichard, CQ HealthBeat Editor

May 7, 2014 -- Don't look now, but the private sector is quietly strengthening its grip on the Medicare program, at least if enrollment in the Medicare Advantage plans is a good proxy.

It's happening despite the payment cuts to private Medicare plans under the health law.

The Congressional Budget Office (CBO) originally estimated that the law would rock Medicare Advantage, by cutting payments that are 14 percent more per patient than reimbursements to providers in traditional Medicare.

But an analysis by Kaiser Family Foundation researchers Tricia Neuman and Gretchen Jacobson notes that the number of people in Medicare private plans reached an all-time high this year of nearly 16 million beneficiaries.

That's 6.3 million more than the CBO projected in 2010 soon after the health law (PL 111-148, 111-152) was enacted, they said. And CBO "now projects Medicare Advantage enrollment will reach 22 million beneficiaries by 2020, more than double the number projected shortly after the ACA was enacted."

Analysts explain the growth by noting that the plans are attractive to the many baby boomers entering Medicare. They can be cheaper than sticking with traditional Medicare and buying supplemental Medigap and Part D drug coverage. For many boomers accustomed to managed care, the transition is not especially harsh.

Medicare Advantage enrollment has jumped 41 percent since 2010, the Kaiser researchers said.

"The ACA froze payments to plans for 2011 and then phased in reductions between 2012 and 2017," they wrote in a research brief released last week. "The reductions were implemented by county on a two-year, four-year and six-year schedule, with the longest phase in allowed for counties with relatively larger payment reductions."

The phased-in approach was designed to give insurers more time to adjust and find ways to deliver services at a lower cost without negatively affecting patient care.

The cuts "have now been fully implemented in more than half of all counties and will be fully implemented in about another quarter of counties next year," they said.

The insurance industry recently wound up a fierce advertising and lobbying effort to pressure Medicare officials to take administrative action to lessen cuts in 2015. Although the reductions won't be as large as originally proposed, they still are significant, insurers and Wall Street analysts say.

America's Health Insurance Plans spokeswoman Clare Krusing said the full effects of the cuts are yet to be felt.

"While that the impact of 2015 final rates will vary by plan, it's also important to note that the ACA cuts are still being phased in and the vast majority have not yet taken effect," she said in an email message. "Only about 20 percent of the cuts CBO originally projected will have gone into effect by the end of 2014 with another 25 percent implemented in 2015 and 2016."

She added that while seniors continue to enroll in Medicare Advantage because of the additional benefits and quality of care, "our concern is that the year-over-year cuts to the program put at risk the coverage seniors like and rely on today."

Insurers note reports that plans are bumping up premiums, passing along more costs to enrollees, and cutting the size of their networks, costing enrollees access to longtime doctors.

Also, a program that awards bonus payments to plans based on the quality ratings is coming to an end. That may mean enrollment could start to take a hit in the next few years. For the moment, data such as that presented in the Kaiser analysis isn't helping insurers make the case to lawmakers that Medicare Advantage is being hit too hard.

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