Forbes Gets it Wrong on Medicare Advantage

Forbes recently published a blog post (“Seniors: No, You Cannot Keep Your Plan Even if You Like It”) that was wildly off the mark on the future of Medicare Advantage.  I commented directly there (my handle on the Forbes blog is MedicareNinja), but had to call it out here. 

I agree, the President overpromised to seniors when he famously said during the health reform debate “If you like your health care plan, you can keep your health care plan.” You can’t cut $135 Billion from plan payments and expect to have no impact on beneficiaries.  But Forbes got it wrong: we are NOT about to see another exodus from the program as we did in the late 1990s.

As we’ve said here before, the exhortations of the death of MA are premature.   We got confirmation from CMS last month: MA premiums will fall another 4% in 2012, and enrollment will grow by a brisk 10%.  This after a robust 2011 where we think AEP will close with MA enrollment up over 8% vs. 2010.

The plans aren’t going anywhere for several reasons — none of which you see if all you’re reading is wonky CBO and MedPAC reports.

First, government programs (Medicare and Medicaid in particular) are the only segments of the insured that are growing. As noted earlier, MA enrollment will grow over 8% this year, topping 12.5 million beneficiaries. Part D is approaching 20 million enrollees.  Just this week Cigna announced it’s spending over $3 Billion to acquire HealthSpring, a pure-play MA plan.  Why?  Because they see tremendous continued growth in the program, not because of its imminent demise.

Second, publicly-traded companies like MA leaders Humana and United are now dependent on Medicare, deriving twice their earnings from the program than they did a decade ago (average publicly-traded health plan earnings from Medicare in 1999: 13%; today, 26%, with some like HealthSpring and Universal American over 70%.)  Bottom line: the big boys ain’t going anywhere.

Third, over 40% of beneficiaries aging into Medicare have enrolled in MA plans the last two years, indicating the Boomers are a much more plan-friendly population than the World War II generation given managed care trends in the commercial market (HMOs, PPOs and POS plans represent more than 90% of all insured Americans).

Fourth, and most importantly, market-leading plans are adapting to the health reform cuts by focusing on Star Ratings quality bonuses and mastering the new state of the art in risk adjustment: the prospective home advanced evaluation. It’s working, enabling plans to hold the line on benefits and premiums, and maintaining the attractiveness of these products vs. Medigap or traditional Medicare.

As long as the Congressional deficit Super-Committee doesn’t fire another broadside at MA plan payment rates this fall, 2012 is shaping up to be a VERY good year, and I’d venture an estimate of over 15 million beneficiaries in these MA plans by the end of 2015.

The Forbes piece struck me as a wonky political hatchet job, trying to score cheap political points against Obama without any real basis in reality.  They’re usually above that sort of thing.