Medicare Advantage Change is Coming!

Higher costs are already starting to impact Medicare Advantage plans. A report from research firm Avalere Health found that premiums rose by an average of 14.2% from 2009 to 2010, led by a 31.2% increase in PFFS premiums. The 14.2% average increase assumes that enrollees shopped around for the best deal; Medicare Advantage enrollees who merely stayed in the same plan would have seen rates go up by 22% this year, according to Avalere.
One reason premiums are increasing is because Medicaid will be cutting its payments to Medicare Advantage plans by 3% to 5% in 2010. Even greater reductions in federal spending may be on the way; President Obama has said overpayments to Medicare Advantage plans average 13%. "If a program was supposed to save 5%, compared to original Medicare, but now costs 13% more, something's got to give," says Peter Wetzel, president of American Medicare Counselors, an insurance agency in St. Louis. "Large cuts in federal spending are very possible."
The Medicare Advantage program has become a political football in Washington. The Democratic leadership and the White House have targeted Advantage overpayments-13% more per beneficiary on average than the government pays for seniors in traditional Medicare-as a giveaway to insurance companies that unfairly raises premiums for all Medicare beneficiaries.
Already, there are signs of a pullback. At the end of 2009, insurers Coventry, Health Net, WellCare and Aetna stopped offering individual PFFS Medicare Advantage plans. In 2010, there will be 18% fewer Medicare Advantage plans available to seniors than there were in 2009, according to the Kaiser Family Foundation. Seven percent of the roughly 10 million beneficiaries who are enrolled in these plans will have to switch, according to the federal Centers for Medicare and Medicaid Services.
Ten years ago, large cuts led to fewer people enrolled in Medicare Advantage and more in original Medicare, Senkewicz recalls. "The program was known as Medicare + Choice then. Plans dropped out of Medicare, and many people were displaced." From 1998 to 2002, some 2.4 million Medicare beneficiaries were dropped by HMOs that either left Medicare altogether or reduced their service areas, citing inadequate federal funding. Some of those seniors found other Medicare HMOs, but some moved to original Medicare.
If Medicare Advantage plans lose appeal or availability again, more seniors will turn to original Medicare, which now attracts about three-fourths of all enrollees. Many financial planning clients already prefer original Medicare, which lets participants choose their own doctors. Therefore, planners are likely to find increased interest in Medicare supplement policies, which help fill the gaps in original Medicare coverage, such as the 20% of doctors' bills that are the patient's responsibility.
"Many clients find the selection process extremely confusing," Wetzel says. "Medicare now has Part A (hospital care), B (outpatient medical expenses), C (private plans) and D (prescription drugs). At the same time, Medigap has standardized policies labeled A, B, C, D and so forth."