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Health Care Bill or No, Medicare Advantage Premiums Will Rise

Oct 01, 2009

In Miami next year, seniors once again won't have to pay any monthly premiums for a Medicare health plan sold by HMO giant Humana Inc.

Meanwhile, in Philadelphia, seniors will pay premiums of $52 – up from zero – for the least expensive HMO plan from Independence Blue Cross.

The new information underscores the drastic differences in how seniors will be affected – depending on where they live -- by federal funding cuts next year to private Medicare health plans known as Medicare Advantage.

On average, beneficiaries who are currently enrolled in Medicare Advantage plans can expect to pay an average premium of about $39 a month, a $7 increase from this year, according to the data released Thursday by the Centers for Medicare and Medicaid Services.

The benefits details also showed that about 660,000 seniors -- nearly 7 percent of Medicare Advantage members -- will have to change plans or enroll in traditional Medicare because some insurers are dropping coverage. Nearly all of those seniors are enrolled in private fee for service plans, which are being subjected  to much tighter regulations because of consumer complaints.

Most seniors in Medicare Advantage are enrolled in HMOs or preferred provider organizations.

Major changes in some Medicare Advantage plans were expected because of a previously announced 4 percent cut in federal funding for the plans next year. But not all seniors are affected. In areas where Medicare pays the highest rates to health plans, such as Miami and New York, seniors will be the least affected and continue to receive the richest benefits.

The changes in benefits to Medicare Advantage plans are being closely watched because the program -- which covers 10 million seniors -- has been at the center of the health overhaul debate.

The reduction in federal payments to the plans next year is separate from proposals by President Barack Obama and congressional Democrats to eliminate more than $130 billion in funding to Medicare Advantage over 10 years to help finance coverage to the uninsured and eliminate what they say are overpayments to the industry.

Those cuts wouldn't begin until 2013. According to the independent Medicare Payment Advisory Commission, the government is now spending an average of 14 percent more on seniors in Medicare Advantage than on those in traditional Medicare.

Health insurers are fighting the proposed cuts in the health overhaul bills, saying they would be forced to sharply curtail benefits and leave markets that would become unprofitable.

The industry's main lobbying group, America's Health Insurance Plans, said Thursday the changes to the Medicare Advantage plans in 2010 shows what can happen when funding is reduced.

The announced cutback by plans "demonstrates the real impact that policy changes can have on the health security of seniors in Medicare Advantage," Karen Ignagni, CEO of the insurance group, said in a statement. "These unintended consequences could have been avoided."

But the Obama administration noted that most seniors still will have a choice of numerous free or low-cost health plans.

"Medicare beneficiaries enrolled in Medicare health plans will continue to have a wide range of plan options in 2010, and those beneficiaries who decide to change plans should find choosing a new plan simpler than in previous years," CMS said in a statement.

In 2010, nearly all Medicare beneficiaries will have access to a Medicare Advantage plan, and almost 87 percent of Medicare beneficiaries will have access to a Medicare Advantage plan that does not require a premium, CMS said.

Health plans began marketing their 2010 plans on Thursday. Enrollees have from Nov. 15 to Dec. 31 to enroll in the plans.

Stephen Fera, a vice president at Philadelphia-based Independence Blue Cross, said eliminating the zero-premium option was unavoidable given the cut in funding.

"Anytime we cannot serve an important segment of our market the way they have come to rely on us is very significant," he said.

Fera said co-payments for doctor and hospital visits would also increase for their Medicare Advantage members next year.

Jordan Battani, a principal with Falls Church, Va.-based CSC, a managed-care consulting firm,  said the Medicare Advantage changes for 2010 were a "mixed bag" for beneficiaries but not the dramatic reductions first feared when the 4 percent reduction was announced in the spring.

"There's no significant large scale changes in benefit offerings," she said.

But how seniors fare in Medicare Advantage depends– like it always has —on where they live.

Paul Precht, spokesman for the Medicare Rights Center, said the benefit changes suggest that not all seniors in Medicare Advantage will see their benefits cut if there are additional funding reductions as part of a health bill.

"I think the lesson is that the impact on seniors will be mixed and that in different parts of the country there will be different responses by insurers," he said.

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