Gov. Rick Scott has made the Affordable Care Act’s cuts to Medicare Advantage a talking point early in his re-election campaign, no doubt spurred on by the fact more than 1.4 million Floridians are enrolled in the program.
In an April 3, 2014, Spanish-language editorial in El Nuevo Herald, Scott brought up several talking points about the program, including threatened premium increases. "Seniors enrolled in Medicare Advantage are going to see an average premium increase between $50 and $90 per month," he wrote.
Many private insurers warned premiums would increase under Obamacare, but we wondered if they would go up as high as Scott said.
After Scott's op-ed published and while we were working on this report, the Centers for Medicare and Medicaid announced it would give Medicare Advantage a little more money next year rather than a bit less. But we still wanted to see where Scott got his numbers from and if they added up.
First, though, let’s take a look at how Medicare Advantage works.
How is Medicare Advantage different?
Medicare became available in 1965, offering retirees both hospital insurance (Part A) and medical insurance for doctors visits (Part B). Lawmakers in the 1970s started suggesting private insurers could offer Medicare benefits at a lower rate than the government-run program. By 2003, those private plans came to be known as Medicare Advantage.
About 30 percent of all Medicare recipients nationwide are enrolled in an Advantage plan. That ratio is about the same in Florida, with 1.4 million in Medicare Advantage and 4.4 million enrolled in Medicare, the Centers for Medicare & Medicaid Services says.
The advantage in Medicare Advantage was ostensibly the savings private companies would realize over what the federal government pays. In reality, that’s not the case; Advantage plans were subsidized at about 14 percent more than regular plans by 2009, when Obamacare was being debated. Some estimates put that overage at about 9 percent or so now.
When the Affordable Care Act became law in 2010, one of the attempts to pay for subsidized health insurance was to cut payments to the Medicare Advantage program to bring costs more in line with traditional Medicare.
The proposal spurred an outcry from private insurers, which said the only alternatives they had were to cut services, shrink networks and increase premiums while cutting into the program’s enrollment. Enrollment has actually gone up, with a 9 percent increase between 2012 and 2013 alone, and about 30 percent since the Affordable Care Act became law in 2010.
But what about premium increases?
Insurance industry advocacy group America’s Health Insurance Plans (AHIP) insists Advantage plans faced cuts of about 6 percent, after a combination of sequestration, a reduction in subsidies, the elimination of bonuses the government paid for quality plans and Obamacare’s tax on premiums.
At the start of every year, the Centers for Medicare and Medicaid Services sets rates for Medicare Advantage so private insurers can bid on selling policies. Those rates are then revised in April and set for the year.
Scott’s campaign directed us to an AHIP-commissioned report from February 2013 that stated on a per member, per month basis, Medicare Advantage patients could potentially face premium increases and benefit reductions in 2014 that would cost $50 to $90 a month. It was a national number, not a Florida number, and was only an estimate based on that year’s preliminary suggestion from the government. (AHIP’s projected Florida increase was actually $50 to $60.) AHIP did not readjust its estimates after payments were set in April 2013.
This year AHIP released a new report that stated on a per member, per month basis, Medicare Advantage patients nationwide could have faced premium increases of $35 to $75, te report said. In Florida those potential increases could have been $35 to $45 by 2015.
AHIP spokesman Robert Zirkelbach said Scott used a number the group estimated, but it was taken from an old projection.
"It seems to me if they were looking ahead, they should have used $35 to $75 in the latest report," Zirkelbach said. He added such a number shouldn’t necessarily be used in definite terms, because AHIP changes its estimates based on the latest information. They will address the $35 to $45 estimate for Florida in this year’s report after they have analyzed the rates that were proposed April 7, he said. The Centers for Medicare and Medicaid Services changed its initial estimate of a 1.9 percent rate cut to a 0.4 percent increase for next year.
We have to note that we're checking what Scott said on April 3, before the federal government reversed its decision to cut payments for 2015 and slightly raise them instead. Even using an old estimate, Scott didn't know for sure that the cuts weren't going to happen.
Other companies and insurance groups come up with their own projected cost increases, but they don’t reflect the trend that the Affordable Care Act seems to be doing what it set out to do: lowering the costs of Medicare Advantage.
Joe Baker, president of the nonprofit Medicare Rights Center, said that despite the "scare scenarios and sky-is-falling stuff," enrollment is increasing, premiums are down almost 10 percent and coverage hasn’t decreased. Premiums may one day increase, but that hasn’t been the trend since 2010, he said.
"People have been forecasting problems and none of those problems have occurred," Baker said. He added that the insurance industry lobbyists (and anti-Obamacare lawmakers) who have been fighting the payment reductions are defending the higher-cost private plans at the expense of the cheaper government-run option, and still manage to make Advantage plans profitable.
"They want to keep market share, so they keep their product competitive," he said. "They want as much reimbursement as possible. They’re profit-making businesses, and even if they are nonprofit, they still care about margin."
Scott said in a Spanish-language editorial that "seniors enrolled in Medicare Advantage are going to see an average premium increase between $50 and $90 per month."
That’s an estimate made by an insurance lobbying group back in 2013, based on government data that wasn’t finalized. Experts we spoke to pointed out the estimate also was created in the best interest of the industry, seeking to maximize government reimbursements for private Advantage plans.
Even the group that commissioned the report from which the projection was culled says it wasn’t the proper number for Scott to use.
We should note that the numbers changed again shortly after Scott's editorial appeared. But even before that, the numbers Scott used were off.
It’s possible that one day premiums may increase, but data since 2010 don’t reflect that. We rate the statement Mostly False.