A few days ago USA Today trumpeted some health policy news: enrollment in Medicare Advantage plans is up and premiums are down. The paper reported that premiums for the controversial Medicare Advantage plans, which provide private benefits for Medicare seniors through managed care arrangements, had dropped an average of seven percent during 2011, while enrollment had grown on average by 10 percent. That was indeed worthy of celebration, according to officials at the Department of Health and Human Services. Secretary Kathleen Sebelius issued a statement apparently intended to pump up the Affordable Care Act: “Premiums are down on average, enrollment is up, and thanks to the Affordable Care Act, we have unprecedented new tools to ensure that seniors and people with disabilities are getting the best value out of their coverage,” the secretary said.
What tools? The paper didn’t say, leaving Sebelius with the last word on that topic. The story’s nut graph did proclaim that the HHS findings counter negative predictions about the effects of the 2010 law, which said premiums would rise and enrollment would drop. No doubt that take on the new numbers pleased Madame Secretary. But buried at the end was a key point made by an insurance industry spokesperson: most of the cuts in Medicare Advantage plans—some $200 billion—would not take effect until 2015. What’s more, the Congressional Budget Office has advised that enrollment in Medicare Advantage plans would level off and actually decline by 2018, while premiums would rise.
Hooray for Kaiser Health News and reporter Marilyn Werber Serafini, who looked more skeptically at the HHS findings. The headine on its story: “Is HHS Medicare Advantage Celebration Premature?” Werber Serafini also quoted Robert Zirkelbach, the spokesman for the insurers trade association America’s Health Insurance Plans. Zirkelbach told her “when you take $200 billion out of the program, it’s going to have a real impact on seniors. These cuts will result in higher out-of-pocket costs and reduced benefits for seniors in Medicare Advantage.”
Werber Serafini also talked to Medicare expert Tricia Newman, a senior VP at the Kaiser Family Foundation, who noted that just because premiums are down doesn’t mean the plans offer good value. Premiums only tell one part of the story. Insurers can finagle the premiums, the copayments, the amount of the coinsurance—a percentage of the medical bill consumers pay—which could mean that a plan with a low premium designed to reel in customers could end up giving seniors lousy value. High coinsurance amounts could mean high out-of-pocket expenses when seniors get sick, and those expenses could outstrip any premium savings.
A while back, I chatted with an actuary for a consulting firm that designs Medicare Advantage plans for insurers. Especially in high-cost areas like New York City, where there are lots of choices and lots of competition, those choices will be become more restrictive in the next six years, he said. “Medicare Advantage plans will be less of a good deal than they are now. The reduction in reimbursements will translate into higher premiums and fewer dollars available for enhanced benefits,” he told me. Some plans, he added, might not survive. Seems like seniors might want to know about this, so that they can begin planning for the health care expenses they will increasingly have to pay out of pocket. And it might be good to know what’s happening in low-cost areas. What kind of competition exists, and what’s it likely to be in the future? Just a few ideas for reporters to chew on!
It looks like the administration may be following a timed-release strategy for sharing health reform news with the public. The day after the Medicare Advantage numbers came out, HHS announced that 3.6 million people on Medicare (out of nearly fifty million) saved $2.1 billion on prescription drugs in 2011 because of rebates and discounts on brand name medicines once their drug expenses reached the notorious donut hole where the government provides no coverage. And here’s another idea to explore. Are discounts on brand drugs authorized by the health reform law encouraging the use of expensive prescriptions while employers and insurers that pay for most care are pushing the use of generics?