The Centers for Medicare & Medicaid Services announced last month that the average premium for Medicare Advantage plans will be 1 percent lower in 2011.
The announcement, nearly six months to the day after passage of the Affordable Care Act, comes as a welcome feather in the cap of the president and health reform advocates who have railed at private insurers for implementing double-digit rate increases for most commercial plans. It also compares favorably with 2009, when Medicare Advantage premiums rose an average of 15 percent.
Seniors in the privately administered Medicare Advanatage plans, who comprise roughly 11 million of the more than 46 million people covered by Medicare, can expect to see the same coverage as in years past, with some plans adding benefits in the prescription drug coverage gap, or "doughnut hole." according to CMS.
"Despite the claims of some, Medicare Advantage remains strong and a robust option for millions of seniors who choose to enroll or stay in a participating plan today and in the future," said CMS Administrator Donald Berwick, MD. "The Affordable Care Act gave us new authority to negotiate with health plans in a competitive marketplace. As a result, our beneficiaries will save money and maintain their benefits."
According to a report in the New York Times, CMS took charge in negotiating with insurance companies offering Medicare Advantage plans, leading to the average premium decrease.
"We negotiated more aggressively than in the past," Jonathan D. Blum, deputy administrator of the Medicare agency, told the Times. "As a result, some plans changed their bids to produce more value for beneficiaries."
According to Blum, some companies that had submitted bids withdrew from the process. The effect of those withdrawals will be minimal in terms of access to Medicare Advantage plans. According to CMS, only 2,300 people who had this form of Medicare coverage in 2010 won't have access to such a plan in 2010.
Yet the real test for the administration will come next year, when the bulk of regulations and decreased government subsidies for the plans kick in.
"Medicare health plans are doing everything they can to keep coverage as affordable as possible for the more than 11 million seniors in Medicare Advantage," said Karen Ignagni, president and CEO of America's Health Insurance Plans. "Nevertheless, as deep cuts go into effect in the coming years, government experts have forecast that millions of seniors will experience higher costs, reduced benefits and fewer choices."
That said, one of the expected impacts of health reform is reduced enrollment in Medicare Advantage plans. According to an analysis by Rick Foster, chief actuary with the CMS, by 2017 projected enrollment in these privately run plans will be about 7.4 million people, half of what was projected under the prior law.
Reducing the number of enrollees in these plans is one way for the government to reduce its healthcare expenditures. During healthcare debate earlier this year, President Barack Obama said the amount paid by the government to the private insurers to subsidize Medicare Advantage plans was too generous.
Administration officials say that curbing the amount of money spent on Medicare Advantage plans under the new law will save upwards of $136 billion over 10 years.