Medicare advantage premiums could climb 25% next year

"Premiums that seniors pay for Medicare Advantage plans will increase an average of 25% next year, largely because insurers, in response to new federal requirements, are canceling many plans that carry no premiums, a top Medicare official said Wednesday," The Wall Street Journal reports. "The average premium will increase to $39 a month for all Medicare private plans from about $32 this year, said Timothy Hill, deputy director for the Center for Drug and Health Plan Choice at the federal agency that manages Medicare. … Insurance companies had signaled there would be an increase in premiums, citing the government's decision to cut payments to Medicare Advantage by 4.5%."

But Hill says the bigger issue is "a 2008 law that requires a category of Medicare Advantage plans, known as Private Fee for Service plans, to establish provider networks. Rather than undertake that task, insurers are ditching many of those plans. In total, more than 667,000 seniors will be affected, most of them enrollees of PFFS plans." Democrats and President Obama have said Medicare Advantage plans are overpaid and have proposed more than $100 billion in cuts. "The Obama administration is already taking steps to beef up the oversight of Medicare Advantage. About 400 plans are being eliminated next year because Medicare officials have said they have too few enrollees or are too similar to other plans, Mr. Hill said" (Zhang, 10/15). 

The Washington Post reports that some seniors "revel in the free perks that private insurance companies bundle with legally mandated benefits to entice people 65 and older to forgo traditional Medicare and sign up for private Medicare Advantage policies. The trouble is, the extra benefits are not exactly free; they are subsidized by the government. And some of the plans pass their costs on to seniors, who pay higher co-pays and additional fees to get care." Efforts by the Obama Administration to cut back on the plans has been met by "an unlikely band of bipartisan defenders who have already battled to restore $10 billion of the proposed reductions." It's also "spooked some seniors, who are the nation's most reliable voters and have been most skeptical about reform" (Rucker, 10/15).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.