How has the health care reform bill changed Medicare Advantage plans?
It hasn't. At least, not yet. The changes to Medicare Advantage, an alternative to traditional Medicare that allows the government to pay insurers to manage benefits to seniors, won't kick in until 2011.
And then, the changes will be phased in gradually and depend largely on where you live, says Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation.
Advantage plans, used by about 23 percent of seniors nationwide and 25 percent of seniors in Ohio, were designed to save money for the government by acting like HMO's. They get subsidies -- 14 percent more than paid to providers through traditional Medicare -- because Congress in 2003 believed that the subsidies would encourage providers to expand the plans into rural and less profitable markets.
"Medicare's current payment system has resulted in excess payments to Medicare Advantage," Neuman says. A George Washington University analysis quantified that excess at $1,138 per Advantage enrollee nationwide, or $1,166 for those in Ohio.
The provisions in the healthcare reform bill are designed to bring payments to these plans more in alignment with payments to traditional Medicare, Neuman says.
The changes will be phased in over three years -- payment rates will be frozen in 2011 and then gradually reduced. Because Medicare payments are calculated on a county-by-county basis, this will vary by area.
The phase-in will make the transition a little easier for Medicare Advantage customers and insurance providers.
"People should not be anxious that the sky is going to fall within the next few months or the next year," says Marc Steinberg, deputy director of health policy at Families USA, a consumer advocacy group.
But, there will likely be changes, he says. Premiums may rise and some plans may reduce the extra benefits
they provide as they adjust to lower payments from the government.
And some insurance companies may stop offering Medicare Advantage altogether.
Aetna, which serves about 101,000 Medicare Advantage customers in Ohio, said in a prepared statement that the company was "committed to continuing the successful growth of our Medicare Advantage business. We will continue to invest in this business, and our value proposition for Medicare Advantage (including our Medicare Prescription Drug plans) continues to be strong."
The important thing to remember is that no one currently using Medicare Advantage is going to be suddenly without coverage, Steinberg says.
"You always have options in Medicare," he says. "You can always switch to another plan if you want to stay in private plans or you always have the option of going to traditional Medicare."
The bill also includes changes that will reward Medicare Advantage plans that are functioning well.
Starting in 2012 plans that receive four or more stars -- out of a pre-existing, five-star rating system administered by the Center for Medicare and Medicaid Services that measures quality of care -- will receive a lower payment reduction.
In 2014 Medicare Advantage plans that are paying less than 85 percent of their premium dollars towards their customers' medical care (as opposed to CEO salaries, advertising, or administrative costs) will have to remit some of those payments to the government.
Nora Super, Director of Federal Government Relations for AARP, a nonpartisan, nonprofit interest group for the elderly, says the organization believes the quality incentives will be a net gain for seniors in Medicare Advantage plans.
"We believe that beneficiaries should have choices available to them, but we want them to have high quality choices, and we think the changes that are in the law move the market in that direction," she says.
-- Brie Zeltner