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Democrats and Health Insurers Battle Over Medicare Advantage Rates

By Jane Norman, CQ HealthBeat Associate Editor

June 7, 2010 -- Democrats and health insurers are once again engaged in the "hand-to-hand combat" promised by Health and Human Services Secretary Kathleen Sebelius, this time over possible rate hikes in the Medicare Advantage program that was slashed as part of the health care overhaul.

Both the HHS secretary and congressional Democrats issued warnings on Friday that a close eye must be kept on health insurers who might try to increase premiums for the 11 million seniors enrolled in Medicare Advantage, the private-plan alternative for Medicare beneficiaries. Monday was the deadline for companies to file bids on those plans.

But Karen Ignagni, the head of the health insurance industry's biggest lobbying group, struck back immediately in a letter to Sebelius, pointing out that Medicare Advantage suffered "significant" cuts under the health law and insurers are "concerned" about the impact on seniors.

The thrust and parry followed a brief period of relative quiet between the industry and Democrats on the Hill and in the Obama administration. Both Sebelius and Democrats have pushed hard, though, for insurers to act in advance of the new law's deadlines for allowing young adults to remain on their parents' policies and halting cancellation of policies for sick people. And Sebelius indicated late last month that "we'll continue to look for opportunities to work with insurance companies but also keep a close watch to make sure they treat their customers fairly."

Democrats say they're now worried that insurers will try to wring profits out of seniors by hiking Medicare Advantage premiums or reducing benefits. Extra items such as eyeglass coverage often are included in those policies to entice seniors to leave traditional fee-for-service plans and join.

Any benefit reductions would have to occur in the extra benefits Medicare Advantage plans provide; under the law they could not trim the core Medicare benefits available to all beneficiaries.

"Health care reform strengthened Medicare and made Medicare Advantage more competitive but it is critical that we don't let private insurance companies use these changes as an excuse to raise premiums or cut benefits for seniors to bolster their own bottom line," said Senate Finance Committee Chairman Max Baucus, D-Mont., in a statement. Baucus and other Democratic health leaders wrote Sebelius urging that she closely review the Medicare Advantage plan bids for 2011 using tools included in the health care law.

Also, Sebelius wrote to the CEOs of health insurance companies and urged them to "focus on competing on price and quality" in Medicare Advantage rather than raising premiums for their sickest policyholders by increasing cost-sharing.

Currently, Medicare pays Medicare Advantage plans more than $1,000 per person per year on average than traditional Medicare, Sebelius wrote to Angela Braly, president and CEO of WellPoint. The health law reduces those payments, provides targeted bonuses to high-quality plans and will limit the extent to which plans can charge co-payments higher than original Medicare, Sebelius said.

In addition, 2011 payment rates are the same as in 2010 so the government expects Medicare Advantage to have "robust plan participation and similar benefits, premiums and cost-sharing offerings as it has today," said Sebelius. She also pointed out there have been reports of increases in profits for insurers who have Medicare Advantage plans.

Ignagni, president of America's Health Insurance Plans, replied in a letter to Sebelius that the new health care law includes $136 billion in direct cuts to Medicare Advantage as well as $70 billion in indirect cuts. "This amounts to the largest funding reduction in the history of this program," she said, and cited predictions by the Centers for Medicare and Medicaid Services actuaries that enrollment will drop.

As medical costs "are allowed to continue to soar" and payments are held at 2010 levels, beneficiaries will begin to feel the effect, she said.

"History has demonstrated that inadequate Medicare Advantage payments result in higher premiums and reduce benefits and choices for seniors," Ignagni said.

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