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Former CBO Director Warns Congress the Worst Hits to Medicare Advantage Are Coming

WASHINGTON – House lawmakers clashed this month over whether cuts to a Medicare program under the Affordable Care Act could lead to higher costs and lower enrollment.


The Medicare Advantage (MA) program, an alternative to the original Medicare fee-for-service program, provides healthcare coverage to Medicare beneficiaries through private health plans offered by organizations under contract with the Center for Medicare and Medicaid Services. The program offers more benefits than traditional Medicare and requires less cost sharing, but is more expensive for the government, which pays more per beneficiary.

More than a quarter of Medicare users are enrolled in the program.

The ACA cuts $716 billion from Medicare over the next decade, with more than $200 billion coming from MA plans, according to some estimates.

Republicans at a subcommittee hearing criticized the scale-down of Advantage provider networks as proof that President Obama misled the country when he promised that people who liked their health coverage could keep it.

“Empty promises may be of little concern to some, but they have real consequence for the Americans who expect us to do no harm,” said Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee. “Americans deserve to know why their existing coverage is changing when they were promised otherwise.”

Rep. Michael Burgess (R-Texas), vice chairman of the Health Subcommittee, suggested that the healthcare law never would have passed if Obama had been honest with the public about the changes it would unleash.

“The president has sold the Affordable Care Act on a raft of false promises,” Burgess said.


The Kaiser Family Foundation estimates that Advantage customers will have an average of 18 plans to choose from for 2014 coverage. That number is down from an average of 20 choices in 2013.

“It’s clear the Medicaid Advantage program is under attack and these beneficiaries are beginning to feel the effect of more than $300 billion in direct and indirect cuts under Obamacare,” Rep. Phil Gingrey (R-Ga.), a physician, said. “Individuals are losing coverage that they are happy with and the doctors with whom they are comfortable with, and this is a tragedy.”

Witnesses testifying before the subcommittee presented completely different views of the state of the MA program under the ACA.

Douglas Holtz-Eakin, president of American Action Forum and former Congressional Budget Office director, said the MA cuts are already having a negative impact on enrollment and plan choices. He said low-income seniors in rural areas without other options for supplemental Medicare coverage will be the most hurt by the cuts.

“Much of [MA’s] value is based on the plans’ ability to innovate and offer needed additional benefits, both of which are compromised in the face of large payment rate cuts,” he said.

The cuts to MA will worsen the program over time, he argued, not only resulting in fewer plan choices and higher cost to beneficiaries, but in foregone benefits and smaller provider networks.

“To judge it by 2013 or 2014 is a mistake,” Holtz-Eakin said. “It is the trajectory over the foreseeable future that concerns me the most.”


But not everyone speaking before the subcommittee agreed about the effects of fewer options for MA beneficiaries.

“While there appears to be some slimming of MA provider networks this year, we must stress that we see this every year,” said Joe Baker, president of the Medicare Rights Center. “Changing provider networks are an inherent risk of any managed-care system.”

Baker supported the smaller number of insurers participating in the MA program, saying there are too many insurers and plans available without enough discernible differences between them. He said consumers are often “too confused by the variety of plans.”

Democrats on the panel argued that the cuts are meant to bolster the long-term viability of Medicare overall. They said the new healthcare law will improve MA by offering more benefits and reduce patients’ share of the costs of medical procedures like chemotherapy.

Rep. Frank Pallone (D-N.J.) asked some of the witnesses to clear up the “myths” spread about the ACA by Republicans.

“The Republicans basically think the Affordable Care Act is the end of the world,” Pallone said.

All of the experts testifying before the subcommittee praised the integral role the MA program plays in the Medicare program. But they disagreed on whether cuts in the ACA will threaten the future of Medicare Advantage.

Jon Kaplan, a senior partner at the Boston Consulting Group, said their analysis found that patients enrolled in the MA plans had better health outcomes than those participating in traditional health care. He said the main factor in these results is how the MA is organized and managed.


Marsha Gold, senior fellow with Mathematica Policy Research, said the funding cuts have actually improved Medicare Advantage plans.

“Payment changes under the ACA have improved the efficiency of the program and may have encouraged plans to respond by enhancing quality, all the while continuing to increase MA enrollment through plans and benefit packages that beneficiaries find attractive,” Gold said.

The Congressional Budget Office predicted in 2009 that cuts to the MA program would lead to reductions in the number of seniors choosing private plans. But the Medicare Payment Advisory Commission says double-digit enrollment growth has continued since passage of the ACA.

Holtz-Eakin said the MA cuts are going to make it very hard for plans to survive, and those that do so will have to make adjustments. He said according to estimates there will be five million fewer enrollees by 2019 when the cuts are fully implemented.

“The net result is going to be less availability of Medicare Advantage,” he said.

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