The Future of Medicare Advantage
The Alliance for Health Reform and the Kaiser Family Foundation (KFF) sponsored a meeting on the Future of Medicare Advantage (MA) on the day that KFF reported that MA enrollment had reached a historic 28 percent of the Medicare population. A major theme of the conference was whether MA enrollment could be sustained or increased in the face of substantial ACA budget cuts in the next few years. The discussion took place against the backdrop of substantially revised Congressional Budget Office (CBO) projections in their May 2013 Medicare baseline that modified a prediction that MA enrollment would decline to 11 million by 2017 to a new assumption that MA enrollment would increase to 21 million by 2023. CBO did not explain their shifting opinion and the panelists had no inside information on the CBO assumptions.
Most of the discussion was optimistic that MA enrollment could be sustained if not increased even in the light of budget cuts. MA plans are projecting enrollment increases of 9-10 percent for 2014. Mark Miller of MedPAC cited analysis that MA bids have come down in recent years (e.g. MA plan bids are 96 percent of FFS costs on average and HMO bids are 92 percent) suggesting that MA plans could continue to successfully compete against Medicare FFS even in areas that will be paid at 95 percent of FFS. Carl McDonald cited 2010 as a historical precedent when MA plans were able to manage large program cuts by lowering costs. He also noted research shows that current Medicare enrollees are very loyal and do not leave their plans even when premiums are increased or benefits reduced. Alissa Fox from the Blue Cross and Blue Shield Association argued that plans will have a hard time absorbing all of the upcoming cuts and that their Association is lobbying for Congress to repeal the upcoming $100 billion tax on insurers. George Strumpf of Emblem Health says he was pessimistic about future MA enrollment and reminded the audience of the experience in the late 1990s when budget cuts drove half of the Medicare managed care plans from the market.
I was at CMS when the Medicare managed care market practically collapsed and I hope that will never happen again. The environment is very different now and will be in the future. For example, demographics have changed and baby boomers who are experienced with managed care can be expected to choose a private plan when value can be demonstrated. MA plans have more of an incentive to stay in the program since governmental spending is now a significant and growing part of their business. Even if some plans leave the program because they are unable to manage the cuts, there are a large number of plans available in the market so beneficiaries will not have to return to FFS Medicare. But more importantly, for the foreseeable future, the FFS program is expected to remain unmanaged and inefficient and thus most MA plans, even if they have to raise premiums and reduce extra benefits, will be able to successfully compete with FFS and its unpredictable high out of pocket costs or FFS with high priced Medigap supplemental policies
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