By Jonathan Easley - 04/07/14 08:27 PM EDT
The Obama administration on Monday canceled planned cuts to Medicare Advantage amid a drumbeat of election-year opposition from Democrats.
The cuts would have reduced the benefits that seniors receive from insurance plans in the program, which offers an alternative to traditional Medicare.
The reversal came as a relief to many Democrats, who feared the cuts would create a backlash among seniors in the midterm elections.
The administration’s move didn’t go far enough for some Republicans, who had threatened to use the cuts as a political weapon this fall.
“Although [the administration] has scaled back some of the new proposed cuts, much more work needs to be done to protect our seniors,” Sen. Orrin Hatch (R-Utah) said in a statement.
Under the planned cuts, insurers offering Medicare Advantage plans were to see their federal payments reduced by 1.9 percent, which likely would have necessitated cuts for customers.
But now the Medicare plans will actually see a net gain, as administration said the federal payments to insurers would increase next year by .4 percent.
The healthcare reform law included $200 billion in cuts to Medicare Advantage over 10 years, in part to pay for ObamaCare. The Centers for Medicaid and Medicare Services (CMS) on Monday said changes in the healthcare market meant it did not need to make those cuts this year.
The administration cited an increase in healthy beneficiaries under Medicare, which it said has lowered the projected costs for that program.
The CMS separately is delaying a risk assessment proposal that was set to take effect under ObamaCare.
Matt Eyles, an analyst for Avalere Health, said the 2.3-percentage-point swing to a positive adjustment over a 45-day-period was “a bit surprising.”
Insurers spent millions of dollars on a lobbying and public relations blitz against the cuts, and dozens of Democrats joined Republicans in calling on the administration to keep the rates flat to avoid cutting benefits for seniors.
The issue threatened the newfound momentum Democrats had on healthcare after the party was energized by a late enrollment surge under ObamaCare.
The opposition to the cuts included Democrats who frequently differ from the administration on policy, including Blue Dog Democratic Rep. John Barrow, a perennial GOP target in Georgia, and Sens. Mark Pryor (Ark.) and Mary Landrieu (La.), two of the party’s most vulnerable Senate incumbents.
Opponents also included White House allies and party heavyweights like Sens. Schumer and Michael Bennet (Colo.), the chairman of the Senate Democrats’ campaign arm.
The opponents wrote a number of letters to the administration urging it to stop the cuts, and some Democrats even engaged in a House floor protest to ramp up the pressure. That’s a reversal for many Democrats, who have historically lampooned the alternative to government health insurance as receiving outsized federal support in comparison to Medicare.
Monday’s announcement is also “significantly better for health plans” than the initial proposal in February, CMS administrator Jonathan Blum said in a conference call with reporters.
“The policies announced today will provide improved benefits in Medicare Advantage and the Prescription Drug Plans while keeping costs low for Medicare beneficiaries,” Blum said. “We believe that plans will continue their strong participation in the Medicare Advantage program in 2015 and beneficiaries will continue to have access to a wide array of high quality and affordable Medicare health and drug plans.”
America’s Health Insurance Plans, the main lobby group for healthcare plans, was among the most vocal critics of the proposed cuts, and had aired ads in the Washington area reminding lawmakers that “seniors are watching.”
Still, critics could frame Monday’s announcement as the latest in a string of unilateral changes to ObamaCare meant to boost Democrats in an election year. Republicans have hammered the administration as “lawless” for instituting myriad delays and changes to the law after the botched rollout.
But the Medicare announcement differs from many of these changes, in that it was hashed out in consultation with industry professionals, and Republicans may be hesitant to attack the administration for instituting a change they support.
In February, the Obama administration argued that the proposed cuts would help strengthen the program — an increasingly popular private alternative to traditional Medicare — and guard against waste.
White House officials had also pushed back at criticism of the pending cuts, noting that Medicare Advantage’s enrollment has spiked to an all-time high since the passage of the Affordable Care Act, and that premiums under the plan have fallen by 10 percent.