Looking to squeeze the middle man, the Obama Administration on Friday proposed to cut payments next year to private health insurers offering Medicare Advantage plans by six to seven percent, a scheme Republicans said would only hurt the elderly and disabled.
“Now the lobbying begins,” declared CRT Capital analyst Sheryl Skolnick in an interview with Reuters. “Can the [insurers] ... get Congress to help make the cut less severe?”
Under federal law, the White House announced the proposed payment scheme for next year to allow input from industry and Congressmen before making a final decision in April. Thus far, insurers and legislators have said cuts would compel many doctors and hospitals to leave Medicare networks, as out-of-pocket costs rose for beneficiaries. Never mind cutting payments, health insurers say they can only maintain the status quo so long as no cuts are made through 2015.
Led by Sen. Orrin Hatch, a Republican from Utah, conservatives said they’d oppose any additional cuts to Medicare Advantage. “These ... cuts are misguided, threaten a successful program for seniors, and must be overturned,” he said in a statement.
Although much is considered when determining Medicare reimbursement payments, government officials expect Medicare Advantage spending to drop by 3.5 percent per person in 2015, a forecast Republicans may not be willing to accept. One health insurance industry executive told Reuters they faced eight to 10 percent cuts when considering other cost adjustments, including a new health insurance tax under the Affordable Care Act of 2010 (ACA).
"Medicare Advantage is extremely popular for a reason — run through the private market, seniors gain access to high-quality and coordinated care with additional benefits that they otherwise wouldn't get," the executive said.
Some political observers say the proposed cuts afford Republicans a politically expedient manner of opposing Obama’s signature health care law — the ACA, much derided as “Obamacare” — as well as the opportunity to please friends in the health insurance industry. Meanwhile, insurers say the proposed cuts would further squeeze insurers, and their patients, after a six percent cut for 2014 payments.
"As 2015 payment rates are finalized, we urge the Medicare agency to protect seniors from facing higher costs and fewer benefits by keeping Medicare Advantage payment rates flat," Karen Ignagni, chief executive of American Health Insurance Plans, said in a statement.
However, administration officials at the Center for Medicaid and Medicare defended the proposed 2015 cuts as reflecting a new cost-estimating methodology taking into account older baby boomers, who generally age a bit healthier than their predecessors — meaning lowered costs overall.