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Medicare Advantage Program to See Modest Changes Next Year, Study Says

By John Reichard, CQ HealthBeat Editor

October 15, 2010 -- Seniors will see modest changes next year in Medicare's private health plans, according to a study released Friday—a conclusion seemingly at odds with Republican warnings earlier in the week that enrollees in the plans face big new costs and vanishing choices because of the health care overhaul law.

But after making adjustments for political spin and different time frames in their analyses, the findings of the study by the Kaiser Family Foundation and the GOP assertions, which were based on a study by Medicare Actuary Richard Foster, aren't necessarily at odds.

Private health plans in Medicare are called Medicare Advantage, or "MA," plans. They've become an increasingly popular alternative to traditional Medicare in recent years because they offer extra benefits.

About 12 million people are now enrolled in "MA" plans, but providers are overpaid relative to doctors and hospitals in traditional Medicare. The health law ends those overpayments over a period of time.

Almost everyone in Medicare will have at least one MA plan as an alternative to traditional Medicare, said the Kaiser study. Medicare enrollees on average will be able to pick from among two dozen MA plans in their county, the study found. Seniors in a relatively small number of counties will have few or no choices, while those in many other counties will have a larger number of plans to select from.

People enrolled in MA plans with prescription drug coverage will see premiums rise by about $2 per month next year if they stay in their current plan, the Kaiser study said. The typical MA plan has prescription drug coverage.

For the first time, all MA plans will limit their enrollees' out-of-pocket costs because of new regulations issued by the Centers for Medicare and Medicaid Services (CMS), the study also noted.

Republican senators issued a statement earlier this week citing projections by Foster that out-of-pocket costs for MA enrollees will grow by $346 in 2011 and continue to rise, increasing by $923 by 2017. The projected increases stem from the health overhaul law's cuts in payments to MA plans, Foster said.

Foster said his estimates take into account the fact that certain types of out-of-pocket costs are lowered under the overhaul; the impact of the MA cuts more than erases those improvements for beneficiaries, he said.

Foster's analysis "confirms that the new health care law jeopardizes seniors access to private Medicare options," Sen. Jon Kyl, R-Ariz., said.

"It's beyond dispute that seniors enrolled in the Medicare Advantage program will not only see their choices disappear over the next decade, but they'll also have to pay much more out of their own pockets," said Sen. Orrin Hatch, R-Utah.

The Kaiser study found that the number of plans being offered will drop 13 percent next year, but hardly disappear. It attributed the decline to a 2008 law trimming a certain type of MA plan, and to CMS regulations designed to lessen confusion from having too many plans to pick from by dropping those with low enrollments.

But the Kaiser study deals with 2011, not with future years. And the impact of cuts in the health overhaul law is expected to deepen in coming years. Analysts say there will be fewer plans, but how many fewer is unclear.

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