Random rants on Medicare Advantage

"The announcement on Medicare came as something of a surprise. Some members of Congress and some health policy experts had predicted that insurers would increase average premiums for Medicare beneficiaries in private plans. Medicare officials said they had held down premiums and co-payments by negotiating with insurers, which sponsor Medicare Advantage plans. We negotiated more aggressively than in the past," said Jonathan D. Blum, deputy administrator of the Medicare agency. (Yep. "They" held down the premiums and co-payments by "negotiating.")

John K. Gorman, a former Medicare official who is now a consultant with clients in the insurance industry, said: "Today's announcement shows that there is a new sheriff in town. Medicare officials were very specific and very forceful. Insurers succumbed to the government's demands and stayed in the Medicare market because they have become much more dependent on Medicare business. Payment rates for Medicare Advantage plans will generally be frozen next year at 2010 levels."

In reality all of this is beneficial to your MA enrollees, and any reduction in premiums for your clients is good news. But, the reality of the announcement is cloaked in the politics of it all. And that's too bad. Stringing out costs for future years is not a sensible solution, as many companies in the insurance industry have already learned.

Karen Ignagni, president of America's Health Insurance Plans (AHIP), hit the nail on the head in a Sept. 21 National Underwriter article, summarizing the announcement: "Medicare Advantage rates are likely to increase rapidly after 2011 if current rules stay in place. Medicare health plans are doing everything they can to keep coverage as affordable as possible. But the Affordable Care Act freezes 2011 Medicare Advantage benchmark rates at 2010, meaning that Medicare Advantage plans will have no way to respond to increases in general health care costs, or the increases in Medicare physical reimbursement rates mandated by Congress. In the past, Medicare providers have responded to program funding cuts by trying to keep rates stable for a year of two, then ultimately dropping out of the market, AHIP says."

And, my friends, that's what happened when we called it Medicare+Choice a decade ago. But, then, politically correct announcements to gain retiree votes weren't a factor. Be alert and stay tuned.

Ron Iverson is president and executive director of the National Association of Medicare Supplement Advisors, Inc.