Medicare Advantage plans look strong now, but questions loom

Exactly how the Medicare Advantage (MA) landscape will shake out in post-health reform America is still a big unknown. A new report from the federal government's chief Medicare actuary, Richard Foster, suggests that MA plans will reduce benefit packages due to approximately $136 billion in reimbursement cuts, resulting in a massive 50 percent fall-off in enrollment by 2017, according to the New York Times. However, early indications from around the industry support the continued survival of Medicare Advantage plans despite the reimbursement cuts included in the Patient Protection and Affordable Care Act, reports Bloomberg BusinessWeek.

Not only did Kathleen Sebelius, secretary of the Department of Health and Human Services, recently tell a House Appropriations subcommittee that Medicare beneficiaries should have "a robust array of choices," but key players in the MA market have started 2010 in a strong position.

Payment cuts won't stop Minneapolis based UnitedHealth Group Inc., from competing with the traditional fee-for-service Medicare program, said President/CEO Stephen Hemsley during a conference call last week to report the firm's first-quarter 2010 results.  UnitedHealth added 215,000 new MA enrollees in first-quarter 2010 and 310,000 over the past 12 months (an 18 percent year-over-year gain).

Louisville, Ky.-based Humana Inc., posted similar gains, adding 273,400 members in first-quarter 2010 (a 19 percent gain) compared to first-quarter 2009. Since Dec. 31, 2009, the insurer has added 233,800 MA members, representing a 16 percent increase.

The key will be how well MA plans are able to rein in enrollee costs while providing better benefits. "We have said for some time now that our Medicare Advantage business must ultimately be able to perform better than fee-for-service Medicare on a comparable-benefits basis and with care quality considered," said Hemsley. "We believe we can achieve and sustain that standard in the majority of our local markets."

The PPACA payment cuts should be taken seriously, but the health reform law also offers MA plans some opportunities, noted Robert A. Berenson, a former Medicare official now at the Urban Institute research foundation in Washington, D.C. For example, in 2014, MA plans will be eligible for 5 percent bonus payments if they implement programs that improve enrollee health or care-delivery efficiency.

To learn more:
- read this New York Times article
- read this Bloomberg BusinessWeek article
- read this UnitedHealth press release
- read this transcript of the UnitedHealth earnings call
- read this Humana press release
- read this Wall Street Journal article 

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