WASHINGTON (AP) — Cuts are on the table next year for Medicare Advantage plans, the Obama administration said Friday. The politically dicey move affecting a private insurance alternative highly popular with seniors immediately touched off an election-year fight.
The announcement gave new ammunition to Republican critics of President Barack Obama's health care law, while disappointing some Democratic senators who had called on the administration to hold rates steady. Insurers are still hoping to whittle back the cuts or dodge them altogether.
Late Friday after financial markets closed, Medicare issued a 148-page assessment of cost factors for the private plans next year. It included multiple variables, some moving in different directions, but analyst Matthew Eyles of Avalere Health estimated it would translate to a cut of 1.9 percent for 2015, a figure also cited by congressional staffers briefed on the proposal.
"There's nothing to like here if you're one of the plans," said Eyles.
Administration officials say the plans don't need to be paid as much to turn a profit, because the growth of health care spending has slowed dramatically. They see the cuts as a dividend for taxpayers.
But the political clout of the plans is growing as seniors flock to them seeking better health care value. Medicare Advantage plans now serve nearly 16 million people, or about 30 percent of Medicare beneficiaries. They can offer lower out-of-pocket costs and broader benefits than traditional Medicare, but often restrict choice.
Insurers say they will be forced to pass on higher costs to seniors or cut benefits if their rates are reduced, and some plans may drop out altogether. The impact could vary significantly around the country.
The industry says the cuts come as Medicare Advantage reductions programmed under the health care law are ramping up. The law sought to compensate for prior years in which the plans were overpaid. But it also includes a new tax on insurers, so industry officials fear the combined impact will be much higher.