CMS to cut Medicare Advantage pay 3.55%

"There's a lot of trepidation awaiting this letter, and not a few Wall Street analysts and CEOs who are like a long-tailed cat in a room full of rocking chairs these days," John Gorman, executive chairman of Gorman Health Group, a consulting firm in Washington, said before the cuts were announced. "There's all kinds of things around that could hurt."

Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) put pressure on Medicare Advantage support by using a promise that Medicare Advantage spending would drop by $206 billion over a decade to help pay for PPACA coverage expansion efforts.

Some estimated at the time that the government was spending 13 percent more for Medicare Advantage enrollees than for traditional Medicare enrollees.

Even after the cuts, the Medicare Payment Advisory Commission, which studies the program for Congress and recommends cost savings, estimates that per-capita costs were about 4 percent in the Medicare Advantage program in 2013 than in the traditional program.

Last year, the administration raised 2014 base payments for Medicare Advantage insurers by 3.3 percent, after initially proposing a 2.2 percent reduction. Insurers say that other government decisions — including a new PPACA industry tax and the budget sequestration ordered by Congress — reduced Medicare Advantage support by a total of about 6.7 percent this year.

Insurers' lobbying campaign against further cuts has included posters plastered around Washington that picture an elderly man with a pair of binoculars, with the warning "Seniors Are Watching."

Although Medicare actuaries estimate enrollment in Medicare Advantage plans will dip next year, the Congressional Budget Office says participation may rise as much as 50 percent by 2023.

–Editors: Andrew Pollack, Angela Zimm

See also:

• Benefits group stumps for Medicare Advantage
• How is Medicare Advantage really doing?
• Insurers win Medicare Advantage battle