Source: Inside Health Policy
The Medicare Trustees predict increased Medicare Advantage growth because the program hasn’t been hit as hard by the Affordable Care Act as expected, and they project four more years of life to the Medicare hospital trust fund. The findings come as GOP lawmakers say the health law’s funding cuts threaten the MA program’s future, but Medicare advocates point to growing MA enrollment.
The short-range financial outlook for the Medicare Part A trust fund improved since last year, the trustees say, so they’re pushing the depletion date out to 2030, which a Treasury statement pointed out was 13 years later than projected before the ACA. Much of the improved outlook is due to lower-than-expected spending in Part A in 2013, fewer hospitalizations, and healthier beneficiaries in skilled nursing homes and home health agencies, the report says.
“Partially offsetting these favorable changes are assumptions about MA plan beneficiaries,” the report says — namely that greater enrollment in Medicare Advantage comes with modest additional costs, one senior administration official said.
The report states that although MA benefits are valuable to enrollees, prior to the ACA they also resulted in higher overall Medicare costs and higher premiums for all Part B enrollees. The plans have been growing –MA plans were responsible for 28.4 percent of beneficiaries in 2013 up from accounting for only 12.8 percent in 2004, according to the Trustee’s report.
The Trustees projected “significantly higher” MA enrollment in the 2014 report than in previous years, with MA plans accounting for 30 percent of beneficiaries in 2018, “primarily because enrollment in these plans has been less sensitive to ACA benchmark reductions than previously assumed.”
“Now that the majority of the Affordable Care Act benchmark phase-in is complete, it can be seen that the decrease in the blended benchmark did not have as large an impact on enrollment as previously assumed,” the Trustees’ report says.
Republicans disagree with that rosy assessment. House Ways & Means health subcommittee Chair Kevin Brady (R-TX) said last week the MA star-ratings demonstration offset Obamacare pay cuts because it pays bonuses to some 80 percent of MA plans. That demonstration runs to the end of the year, and when plans lose those bonuses, they’ll feel the true effect of the Obamacare pay cuts, he said.
The Trustees report mirrors a report recently released by the Medicare Rights Center that shot holes in “doomsday predictions” of the collapse of the MA market.
“Our evaluation and analysis of the MA market shows that such predictions have failed to materialize and that Medicare beneficiaries in New York and nationwide continue to have broad access to affordable MA plans,” the seniors’ advocates report states.
John Graham, a senior fellow with the National Center for Policy Analysis, said the administration has pulled back from following through with what were feared to be drastic cuts. The cuts have not been as bad as anticipated when the ACA was passed, he said. CMS recently backed off proposed MA pay reductions and adopted some of the insurance industry’s recommendations, including factoring in the cost of home risk assessments, when setting the 2015 MA rates.
Enrollment growth in MA is expected to slow between 2015 and 2018 when the changes have fully phased in, the report says. Graham says the slower projected enrollment over the next few years might show that the MA program might be close to reaching its capacity, and reaching a state of equilibrium with slower enrollment growth.
A spokesperson for America’s Health Insurance Plans, which has warned against MA pay cuts, said the trustees’ report shows that MA remains popular. AHIP added that it’s also important to note that while more individuals are choosing MA plans, the Medicare program as a whole is growing as well.
However, the spokesperson said AHIP remains concerned that cuts to the program continue to put MA at risk.
Medicare Trustee Robert Reischauer said the report should not be taken as a sign that Medicare’s financial worries are over. Some might take the report as a sign that Medicare is healing itself, and no intervention is necessary, Reischauer said, but that would not be prudent. Legislation is needed to address the sustainability of the Part A trust fund and the growing burden on beneficiaries from Medicare Part B, he said. The sooner challenges are addressed, the less disruptive necessary changes will have to be, he added.
The report states that lawmakers could address the long-range financial imbalance in the hospital trust fund with an immediate 30 percent increase in the standard tax rate or an immediate 19 percent reduction in spending.
“More realistically, the tax and/or benefit changes could occur gradually but would ultimately have to reach significantly higher levels to eliminate the deficit throughout the long-range period,” the report says.
The Center for Medicare Advocacy says in a statement that lawmakers could help improve Medicare’s outlook in part by “reducing wasteful overpayments to private Medicare Advantage plans.”
The Trustees report says the ACA is making important changes to the Medicare program to improve its financial outlook, but the report also says that “there is a strong possibility that certain changes will not be viable in the long range,” particularly the provider productivity cuts included in the ACA.
“The ability of health care providers to sustain these price reductions will be challenging, as the best available evidence indicates that most providers cannot improve their productivity to this degree for a prolonged period given the labor-intensive nature of these services,” CMS Chief Actuary Paul Spitalnic says in a statement of actuarial opinion attached to the report. Overriding the productivity adjustments, like lawmakers have done with Sustainable Growth Rate cuts, would lead to substantially higher costs for Medicare than what the Trustees’ report projects, he adds.