More Cuts to Medicare Advantage?


Among the most memorable lines of the debate prior to the passage of the Patient Protection & Affordable Care Act were those spoken by then-House Speaker Nancy Pelosi, "We have to pass the bill so that you can find out what is in it, away from the fog of controversy.”

Increasingly, Americans are finding out "what is in it". For those covered by Medicare Advantage, the news isn't good.

Granted, it is a time of belt-tightening for the federal government. At some point in time, all of us will inevitably be called to sacrifice in some fashion or another. What is most egregious in this case is not the dollars and cents, but rather the arguably deceptive way in which cuts have been implemented.

Currently, there are two cuts pending to the popular senior health program, which provides coverage to roughly 28% of all seniors. One is a $200 billion cut to Medicare Advantage that providers and insurance companies were already expecting.

The other, a 2.3% cut to Medicare Advantage filed on February 15, took everyone completely by surprise.

Let's first look at the $200 billion cut to Medicare Advantage, parts of which have already taken place.

Knowing full well the popularity of the program, the Obama Administration and its presidential campaign--oft-interchangeable--did not want to feel the wrath of seniors in the voting booth in November 2012. Thus did the administration, using a little-known appropriations authority which allowed it to bypass Congress, initiate an $8 billion grant for an "HHS demonstration project".

Such projects are supposed to be done on a limited scale, as a means to test various reforms to see if they help reduce costs or increase favorable health outcomes. To put it in perspective, one could add up the cost of every single HHS demonstration grant issued from 1995 through 2012, and the sum still wouldn't come close to the $8 billion expended upon this one single grant. By the way, unlike other demonstration projects funded by these grants, no study was even conducted.

Instead, the $8 billion was used to prop up Medicare Advantage through the election period, so seniors wouldn't feel the impact of the cuts imposed by the health care law. The Government Accountability Office called the expenditure an entirely inappropriate use of the grant program that should be rescinded. Even the Washington Post and New York Times called the president out on this. Of course, at this time, people were much more consumed with the media's obsession with gaffe-by-gaffe coverage of the race.

The 2.3% proposed cut to Medicare Advantage providers, meanwhile, has also been down outside the Congressional appropriations process, having been filed on February 15 in the form of a regulation. No one saw this coming--certainly not the insurance companies, health care providers, Congress or seniors. By the way, the 2.3% cut is in addition to the $200 billion the administration sought to cover over with HHS demonstration project funds.

When pressed on the issue, the administration has replied that it was simply treating the private insurance companies the same as the traditional fee-for-service government -run program. Medicare, it argues, is scheduled to experience a 2.3% cut in provider reimbursements. Why shouldn't these companies?

But here's the rub--traditional Medicare providers have been scheduled to see the same 2.3% cut for over a decade now. Each year, Congress, regardless of the party in power, and the president, again regardless of party, have come up with what is called "the doc fix", restoring the funding that was supposed to be cut. In fact, the necessity of the doc fix was one thing upon which both parties agreed during the fiscal cliff negotiations of 2012.

Put plainly, the president has justified these additional cuts because it would put Medicare Advantage at parity with a government program which will, as a matter of practical reality, never see the cuts.

If the administration does not reverse its decision, the policy will go into effect on April 15.

So, you may ask, where is the AARP on this? After all, this politically powerful group is the nation's largest lobbying group representing seniors, right?

It turns out that Medicare Advantage's loss is AARP's gain. AARP's Medi-Gap plans are a supplement to traditional Medicare fee-for-service. Seniors with Medicare Advantage bypass the traditional Medicare system and thus don't need Medi-Gap policies. It is in the best financial interest of the AARP for the cuts to Medicare Advantage to take place as planned.

With this quiet filing of a major cut, this administration is doing little to dispel the notion long held by many conservatives that the Affordable Care Act is to simply the first step in a broader agenda to the push the private insurance industry out of the health care equation entirely.

If the Medicare Advantage provider cuts are to be reversed, the only way pressure can be brought to bear is through grass roots activism. Seniors need to know what is happening, tell others about it, and start lighting up the phone lines of their US Congressmen and Senators. Absent a loud outcry, these cuts will happen.