Under intense, bipartisan political pressure, the Obama administration backed down for the second year in a row on proposed payment cuts for insurance companies that offer private plans to Medicare members.
After estimating in February that the cuts required by the Affordable Care Act as well as other adjustments would reduce what it pays insurers next year by 1.9 percent per beneficiary, the Department of Health and Human Services said Monday it would instead give Medicare Advantage plans a raise of 0.4 percent.
America鈥檚 Health Insurance Plans, the main industry lobby, said it was still studying the announcement. While it acknowledged that Monday鈥檚 action leaves payments higher than what HHS had originally proposed, it disputed the agency鈥檚 statement that 2015 rates would rise. AHIP had calculated the originally proposed cuts to be nearly 6 percent, not 1.9 percent.
Adjustments to the February proposals 鈥渨ill help mitigate the impact on seniors,鈥� AHIP CEO Karen Ignagni said in a statement. 鈥淏ut the Medicare Advantage program is still facing a reduction in payment rates next year鈥︹��
Ana Gupte, an industry analyst for Leerink Partners, agreed, saying the rates disclosed Monday will cut Medicare Advantage payments by about 3 percent. Still, that鈥檚 a smaller reduction than what she calculated to be 5.5 percent in HHS鈥檚 first proposal, she said in a note to clients.
The administration, for its part, portrayed the rates disclosed Monday as even better than the flat, year-to-year change that insurance companies sought.
鈥淭he industry asked us to use whatever means we could to keep the rates close to parity, to where they are today,鈥� 聽Jonathan Blum, principal deputy administrator at the Centers for Medicare & Medicaid Services, told reporters. The rates set Monday are 鈥渁 little higher than what the industry had recommended,鈥� Blum said.
Among other alterations, HHS dropped a plan to abandon the use of home-visit diagnoses for assigning member risk scores that affect payments. That proposal alone would have shaved 2 percentage points off what Medicare Advantage plans get from the government, according to聽聽commissioned by AHIP.
鈥淭here鈥檚 a little bit for everybody鈥� in the final policy for 2015, said Anne Hance, a lawyer with McDermott Will & Emery who represents insurers. The administration 鈥渢ried to work with Medicare Advantage organizations and recognize their concerns,鈥� she said.
Medicare Advantage costs taxpayers about聽聽per beneficiary than traditional Medicare, according to the Medicare Advisory Commission. Reducing or eliminating that gap could save the program billions of dollars, proponents say.
Sen. Orrin Hatch, R-Utah, who sits on the Senate Finance Committee, said Medicare Advantage is still threatened from future reductions required by the health law.
鈥淎lthough CMS has scaled back some of the new proposed cuts, much more work needs to be done to protect our seniors,鈥� he said in a statement.
Medicare calculates what it pays private insurance companies with a complicated formula, including several variables.
Last year 28 percent of Medicare beneficiaries聽in a Medicare Advantage plan run by UnitedHealthcare, Humana or other insurance companies.聽
HHS鈥� initial notice of the 2015 changes prompted a聽lobbying and publicity offensive聽by insurance companies arguing cuts would degrade coverage and raise prices for seniors.
Republican lawmakers as well as Democrats聽聽the cuts. Democrats up for election this year were deemed vulnerable to accusations that they supported Medicare Advantage cuts in the health law, which remains unpopular.
HHS holds wide latitude to adjust payments beyond the reductions required by the Affordable Care Act,聽聽by the nonpartisan Congressional Budget Office to be $156 billion over a decade.
A year ago the administration also softened Medicare Advantage cuts, causing insurance company stocks to soar after the news came out.
This article was produced by Kaiser Health News with support from .