Medicare Advantage & the Affordable Care Act

The Obama Administration has embarked on a path to strengthen and improve Medicare Advantage.  With new tools and resources provided by the Affordable Care Act, we are working to ensure Medicare Advantage plans provide good value to beneficiaries and that the program remains robust.  As a result, more Americans are enrolling in Medicare Advantage plans in 2011 and overall they are seeing lower costs, better benefits and higher quality care.

Strong Enrollment in and Choice of Medicare Advantage Plans

Enrollment in Medicare Advantage is on the rise and is exceeding insurance company expectations. From 2010 to 2011, enrollment in Medicare Advantage increased by 6%.

On average, there are 26 Medicare Advantage plans to choose from in every county across the country.  Access to Medicare Advantage remains strong, as more than 99% of Medicare beneficiaries have a choice of Medicare Advantage plans as an alternative to Original Medicare in areas where they live.

Affordable Premiums and Out-of-Pocket Costs

As enrollment is increasing, costs for beneficiaries are decreasing.  In September, plans projected that the average Medicare Advantage premiums would decrease by 1% between 2010 and 2011.  Based on actual data, CMS now estimates that the weighted average Medicare Advantage premiums dropped even more: by 6% from 2010 to 2011.  Generally, this resulted from more people selecting lower cost plans than projected.

In total, the Administration negotiated $150 million in reduced beneficiary premiums and cost sharing with Medicare Advantage insurers last year using new authorities granted by the Affordable Care Act.  These types of reductions in cost sharing help ensure that our sickest or frailest beneficiaries with Medicare Advantage can access needed medical care such as skilled nursing care, chemotherapy, and renal dialysis without unaffordable out-of-pocket costs.

Comprehensive Benefits

As the new health care law strengthens Medicare Advantage, the supplemental or value-added benefits offered by these plans increased between 2010 and this year; from an annualized amount of $972 in 2010 to $984 for 2011.  All seniors enrolled in a Medicare Advantage plan are guaranteed to receive all guaranteed Medicare benefits.  And beginning in 2014, the new law protects Medicare Advantage members by taking strong steps to ensure that at least 85% of every dollar these plans receive is spent on health care, rather than administrative costs and insurance company profits.

High Quality Care and Providers

Ensuring that Medicare beneficiaries have access to a wide range of high quality providers and high quality care is a top priority.  A quality bonus program will provide financial bonuses to Medicare Advantage plans that improve the quality of care for Medicare beneficiaries. This “five star” ratings program will allow plans to earn additional payments and provide improved quality for patients.

In addition, provisions in the new health care law are adding quality incentives designed to strengthen the health care workforce and improve care for all Medicare beneficiaries.  These incentives include Medicare payment bonuses for primary care providers, and other providers in underserved areas and investments in health professional training programs to retain and increase the number of available doctors.

In 2011 alone, data from CMS shows a 5% increase in the number of Medicare beneficiaries who are enrolled in Medicare Advantage plans that received a four or five star rating.

Building a Better Medicare Advantage

Today, Medicare pays Medicare Advantage insurance companies over $1,000 more per person on average than it spends per person for people with Original Medicare. These additional payments are paid for in part by increased premiums by all Medicare beneficiaries—including the nearly 36 million seniors not enrolled in a Medicare Advantage plan. The new law levels the playing field by gradually eliminating Medicare Advantage overpayments to insurance companies.

All beneficiaries will see premiums decline on average by $1 to $3 as a result of this provision.  And all Medicare beneficiaries will receive guaranteed Medicare benefits.

Posted: February 10, 2011