CMS: Medicare Advantage enrollment to jump next year, premiums to fall

Enrollment in the controversial Medicare Advantage (MA) program will increase by 5 percent in 2011, while average premiums will drop by 1 percent, the Obama administration announced Tuesday.

White House health officials said the numbers indicate that — despite threats from conservatives and the insurance industry that the new healthcare reform law will cripple MA plans at the expense of seniors — both patients and taxpayers will benefit from the reforms.

"Despite the claims of some, Medicare Advantage remains strong and a robust option for millions of seniors who choose to enroll or stay in a participating plan today and in the future," Donald Berwick, head of the Centers for Medicare and Medicaid Services (CMS), said in a statement. “The Affordable Care Act gave us new authority to negotiate with health plans in a competitive marketplace. As a result, our beneficiaries will save money and maintain their benefits."

The MA program — under which the government pays private insurance companies to cover Medicare patients — has been a lightening rod of controversy since its creation in 2003. Seniors have flocked to MA plans because many of them cover services, like dental and eye care, that Medicare doesn't.

But the extra care hasn't come cheap. Despite promises that private plans operating under MA could eventually save money, the cost to treat the average MA patient is roughly 14 percent higher than the cost to treat the average senior under traditional Medicare. 

The Medicare Payment Advisory Commission, an independent panel that suggests reforms to Congress, has noted that part of the additional cost “consists of funds used for plan administration and profits and not direct health care services for beneficiaries.”

Such statements have fueled criticisms from patient advocates and consumer groups that MA is just a giveaway to insurance companies. Many Democrats tend to agree, and the new reform law cuts MA subsidies substantially over the next decade.

As part of that effort, Medicare will freeze payments to MA plans next year, before actual cuts take effect further down the line.

The freeze has done little to discourage plan participation, CMS said Tuesday, largely crediting the insurance companies themselves. 

"The plans are making very strong commitment to their programs," Jonathan Blum, director of CMS’s Center for Medicare, told reporters in a phone call. "We're seeing better value for beneficiaries and for taxpayers."

Among the other revelations Tuesday: 

• About 5 percent of MA enrollees will have to choose new plans in 2011, largely resulting from MA reforms enacted in 2008. Of those seniors, all but 2,300 will have the option of choosing another MA plan; 

• 99.7 percent of Medicare beneficiaries will have access to an MA plan in 2011;

• Of the roughly 2,100 MA plans submitting 2011 bids, CMS identified 300 that had proposed to hike premiums or other cost sharing on seniors, while also increasing their profit margins. After CMS threatened to deny those plans, all but seven plans reworked their bids to the benefit of seniors.