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Feds: We jawboned lower premiums

By Carol Gentry
9/21/2010 © Health News Florida

Medicare Advantage plan enrollees will see a 1 percent reduction in premiums for next year, on average, and increased protection against out-of-pocket spending, federal health officials said today.

The new Patient Protection and Affordable Care Act signed into law by President Obama in March gave officials power to negotiate with Medicare plan sponsors for the first time, and they did so with gusto, said Donald Berwick, administrator for the Centers for Medicare and Medicaid Services (CMS).

“We identified 300 Medicare Advantage plans that proposed to ...decrease the value of benefits and increase profit margins,” he said in a phone call with reporters. “We said no.”

Only seven plans from three companies pulled out, officials said. The others responded to negotiations by reducing costs to beneficiaries an average of 5 percent, or $150 a year.

Medicare Advantage pIans have been increasing enrollment and are projected to grow by 5 percent next year, in contrast to the "gloom and doom" predictions of those opposed to the Act, said Health and Human Services Secretary Kathleen Sibelius, who was also on the call.
The 1 percent average reduction in premiums contrasts sharply with the 15 percent increase in premiums for this year, before CMS got the power to negotiate with plans, Sibelius said.

(Update: By mid-afternoon, the Association of Health Insurance Plans checked in to take credit for the better-benefits-for-less result. AHIP President and CEO Karen Ignani said in a release: "Medicare health plans are doing everything they can to keep coverage as affordable as possible for the more than 11 million seniors in Medicare Advantage.
"Medicare health plans continue to demonstrate their strong and long-term commitment to this program. Nevertheless, as deep cuts go into effect in the coming years, government experts have forecasted that millions of seniors will experience higher costs, reduced benefits and fewer choices.” )

Taxpayers contribute most of the premium for beneficiaries' membership in Medicare Advantage (MA) plans. Premiums from the government will remain the same for 2011 as this year, then be reduced in future years, under the new law.

The Obama administration and Congressional Democrats used the reduction in payments to MA  plans to pay for part of the expansion of coverage to 32 million uninsured Americans. They targeted that pot of money, they said, because independent actuaries and government reports had calculated the plans cost 13 to 14 percent more than spending for traditional fee-for-service Medicare. The managed-care program was created in the 1990s with the idea that it would be more efficient than traditional Medicare and thus save money.

In addition to holding the line on premiums, Sibelius said, CMS told plans they had to set an overall out-of-pocket spending limit for beneficiaries. Now, some plans have no such limits, or they appear to set a limit but in the fine print they exclude certain expensive services from it, such as chemotherapy, dialysis and skilled nursing care.

This led to great confusion for beneficiaries who thought they were protected but found out after a significant health setback that they weren't. The ceiling on out-of-pocket spending varies according to the type of plan and other factors.

In fact, many health plans and drug-only plans will have changes in coverage this year, so Berwick urged beneficiaries to check the Medicare & You book they'll get in the mail or go online to, where choices are available by zip code. 

A complete list of plans for each state can be found here.

--Carol Gentry, Editor, can be reached at 727-410-3266 or by e-mail. Questions, comments, letters to the editor are all welcome.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.