Medicare Manipulation

February 3, 2012

Continuing an unfortunate pattern of misleading messaging, HHS this week released information highlighting the success of the Medicare Advantage program, touting new figures showing increased enrollment and lower premiums. According to National Journal, "HHS officials said the new numbers prove that health reform isn't hurting Medicare's managed care programdespite Republican fears and Congressional Budget Office predictions."

Good news, right? Not so fast.

The health care law cuts over $200 billion from Medicare Advantage. That fact is indisputable, and its consequences are widely understood to be bad news for seniors. The Congressional Budget Office and CMS Office of the Actuary projected that these cuts would result in massive enrollment declines due to higher costs and fewer benefits for seniors. With these dramatic cuts taking place, how are premiums dropping? They're dropping in the short-term thanks to yet another budget gimmick in a law that we now know is filled with gimmicks. In this case, the full extent of the cuts aren't actually happening ... yet. In what appears to be a clear attempt to avoid a short-term political backlash from seniors affected by these cuts, the administration is pumping an additional $6.7 billion into Medicare Advantage plan payments from 2012-2014 by accelerating, increasing, and expanding bonus payments to plans.
The $200 billion in Obamacare cuts do not go fully into effect until 2015. To understand what those cuts will mean, consider a quote buried at the bottom of a USA Today story, in which a spokesperson for America's Health Insurance Plans pointed out, "the independent and non-partisan Congressional Budget Office (CBO) predicted that enrollment would level off and decline from 11.7 million participants in 2011 to 7.5 million in 2018, while premiums would rise."
It is no surprise that when political appointees can manipulate payments with no real oversight, the Obama administration has been able to temporarily shield seniors from the harmful consequences of the health care law's Medicare Advantage cuts. Unfortunately for the seniors who depend on this program and are counting on it for long into the future, reality will set in when these cuts are imposed in full. According to non-partisan estimates, that means enrollment will drop anywhere from 35-50% - hardly the welcome news being trumpeted by the administration today.