Insurers ready to battle Medicare cuts

The health insurance industry is beginning a ferocious lobbying offensive aimed at warding off major cuts to Medicare payments.

Insurers are hoping to block a 2.2 percent cut in government payments to the privately administered Medicare plans known as Medicare Advantage.


The industry has pulled out all the stops for the campaign, which includes inside-the-Beltway lobbying as well as efforts to put local pressure on lawmakers who hail from states where Medicare Advantage plans are popular.

The latest move from insurers is a new television ad that will begin to run Wednesday in the Washington area before expanding to local markets.

“Seniors will pay more, get less and lose choices,” the ad says.

The 30-second spot is set to run in New York, Louisiana and Pennsylvania after its D.C. premiere, and some version will appear either on television or online in 12 states the industry has targeted in its lobbying push.

“Seniors in Medicare Advantage got hit hard by health reform,” the ad’s narrator states. “The sequester piled on more cuts. Now, the Medicare agency is proposing deep, new payment cuts. It’s too much.”

America’s Health Insurance Plans, the primary trade group for insurance companies, began to push back almost immediately after the Centers for Medicare and Medicaid Services (CMS) first proposed a 2.2 percent cut in Medicare Advantage payments.

In the roughly two weeks since the CMS proposed the payment reduction, AHIP has released a flurry of reports and studies defending Medicare Advantage and making the case that another cut would carry enormous consequences.

Insurance companies are no strangers to the Washington power game — the industry spent millions of dollars advertising against the Affordable Care Act before it passed, and it is still pressing Congress to repeal the law’s tax on insurance plans.

But the Medicare Advantage cuts are different, in part because it’s a regulatory change rather than a piece of legislation. That makes it harder to build an energized opposition, while also compressing the timeline for lobbying — the cuts will take effect in about a month unless AHIP builds enough energy to block them.

“The challenge is creating that urgency” around a more technical issue, said a source familiar with the lobbying campaign.

AHIP desperately wants to block the payment cuts from taking effect, the source said, noting that this will be the biggest and most intensive campaign the industry has launched in years. Even its ads against the Affordable Care Act were largely channeled through third-party organizations.

But if the payment cut does take effect, the high-profile lobbying campaign could also help insulate insurance companies from taking the political blame if seniors lose access to their Medicare Advantage plans.

“The industry does not want to take the blame for disruption in this program,” the source said. “We’ve seen that playbook before, in the 1990s, and it isn’t pretty.”

AHIP says allowing the most recent cut to take effect could spur a repeat of 1997, when cuts to private Medicare plans prompted companies to leave certain markets. As many as 900,000 people dropped out of the private plans between 1997 and 2002, when Congress began to restore funding, AHIP said.

In addition to the compressed timeline, AHIP is emphasizing that the proposed 2 percent cut would come on top of significant cuts Congress has already passed. The Affordable Care Act cuts Medicare Advantage by roughly $200 billion over the next 10 years and the vast majority of those cuts haven’t kicked in yet.

Democrats have never been wild about private Medicare plans, and they have targeted them in the healthcare law, saying there is no need for the government to subsidize competing, private coverage. Medicare Advantage plans have higher per-person costs than traditional Medicare, and critics say the plans keep their overall costs low by cherry-picking the healthiest seniors.

The healthcare law also includes a new tax on insurance plans. AHIP says the tax will raise premiums, and adding more cuts to the Medicare Advantage plans will only make the sticker shock worse.

The cumulative cut could be roughly 7 to 8 percent, according to a study AHIP commissioned from the consulting firm Oliver Wyman. The study found that the proposed cuts would affect nearly all of the 14 million seniors who use the program. Plans would have to either cut benefits or raise premiums to cover an extra $50 to $90 per month for each customer.

AHIP has tried to drive its message home over the past two weeks with reports detailing the number of poor people and minorities who choose Medicare Advantage, and with a report that says the private plans provide higher-quality care than traditional Medicare.

“Washington cannot tax and cut Medicare Advantage this much and not expect seniors to be harmed,” AHP President and CEO Karen Ignagni said in a statement after the cuts were proposed. “These changes will disrupt coverage for Medicare Advantage beneficiaries at a time when evidence clearly demonstrates that Medicare Advantage provides higher-quality care than the fee-for-service part of Medicare.”

AHIP is deploying its grassroots advocacy arm, the Coalition for Medicare Choices, to urge seniors to contact lawmakers about the cuts, in the hope that lawmakers will then pressure the CMS to abandon or scale them back.

Thousands of calls have been placed, according to the source familiar with the campaign, and thousands of seniors have also registered their support on Facebook. AHIP has launched new social media efforts just for this lobbying campaign, including a Facebook page and Twitter account.