Medicare Cut Could Reduce Benefits For Millions

WASHINGTON - Millions of Medicare recipients face costlier premiums or reduced coverage if the government goes through with proposed cuts to the program next month.

At risk are 3.3 million retirees nationally who receive Medicare Advantage benefits through former employers or unions, according to a coalition of business and labor groups.

Under those plans, companies or unions arrange for Medicare-subsidized healthcare coverage for retirees through private insurers. The plans usually offer added benefits - such as vision care - compared to typical Medicare.

The Centers for Medicare and Medicaid Services are expected on April 4 to lower reimbursements to insurance companies that offer the plans.

The change, which would go into effect next year, could lead to dropped benefits, according to the coalition that includes the retirement system for 31,000 Kentucky teachers and the union representing health care workers in Massachusetts.

The coalition last week launched what it described as a "seven-figure" television advertising campaign in states with key lawmakers. It hopes to get Congress to pressure the Medicare agency to change course.

"Retirees, your healthcare may be on the line," warn the ads placed by the Coalition to Save Medicare Advantage Retiree Coverage.

However, some consumer groups support the change.

The government pays more for retirees on Medicare Advantage than others in the Medicare system. The extra money goes toward added benefits, as well as to private insurers who arrange the coverage.

Supporters of lowering the reimbursements say it will address a longstanding criticism that the majority of 55 millions of Americans with Medicare subsidize the Advantage program by paying slightly higher premiums.

About 17 million people are enrolled in Medicare Advantage plans. Most sign up for coverage individually, though about 3.3 million are part of group coverage offered by employers or unions.

Among those in the coalition opposing the latest change to reimbursements are business groups including the U.S. Chamber of Commerce and insurance companies such as Aetna, Met Life and UnitedHealth, which offer Medicare Advantage and profit from the program.

As part of the arrangement for Medicare Advantage offered by employers and unions, private insurers receive a set amount for insuring groups of retirees, instead of being reimbursed for the cost of medical procedures performed. The government sets the amount based on costs in each county, adjusting for age and each group member's health.

Under a complicated process, insurers submit bids of how much they're willing to pay for coverage. If Medicare reimburses more than that amount, insurers get a rebate for the difference. The money helps pay to enhance plans with richer benefits.

The U.S. Chamber of Commerce said the proposed decrease in the reimbursements will cost insurers $750 million to $870 million next year, which could translate into a $250 premium increase next year.

Making the cuts will hurt retirees, said Jane Gilbert, director of retiree health care for the Kentucky Teachers Retirement System. Gilbert was in Washington last week meeting with Kentucky's congressional delegation.

The retirement system pays the monthly health premiums for teachers, she said. If premiums go up, she said, it may have to switch to a cheaper plan with fewer choices of providers.

Insurers may also stop offering extra benefits, such as hearing or podiatry care, she said.

An expansive affiliate of the Service Employees International Union also backs the effort to keep the plans intact. The union, 1199 SEIU United Healthcare Workers East, represents 400,000 members in Massachusetts, New York, Maryland, New Jersey, Washington, D.C., and Florida.

"After working hard all their lives, American seniors deserve dignity, security and affordable healthcare. … Working people have fought for these benefits, and we expect Washington to enact policies to support retirees, not undermine them," the group said in a statement.

The move is also opposed by a number of business groups including the Georgia Association of Manufacturers and state chambers of commerce including those in Indiana, Pennsylvania, Oklahoma and Texas.

The proposed cut to reimbursements comes after government auditors and a Medicare advisory group criticized the program for using scare funds to pay insurance companies more than the cost of coverage.

Medicare Advantage pays insurers 6 percent more for the employer and union plans than what it pays for other enrollees, the Medicare Payment Advisory Commission found.

The proposed change would bring reimbursements in line with those paid for individual Medicare Advantage plans, continuing a series of cuts called for in the Affordable Care Act.

The Center for Medicare Advocacy, a consumer group, said it generally supports the change.

Other Medicare recipients subsidize higher amounts paid for Medicare Advantage, said the center's managing attorney, David Lipshutz, in an interview.

Edwin Park, vice president for health policy at the left-leaning Center on Budget and Policy Priorities, acknowledged that group-plan recipients may see some loss of coverage.

But, he noted, not all of the reimbursement cuts will affect the rebates used to offer added coverage. Some will cut into the profits of insurance companies.

He, too, questioned the fairness of other Medicare recipients subsidizing greater benefits for the group plans and insurance company profits.

The campaign against the cuts is having an impact.

Republicans on the Senate Finance Committee wrote the Medicare agency last week and "strongly urged" it to reconsider the change and "carefully consider the impact of these changes on Medicare beneficiaries."

Among those signing the letter were Senate Majority Leader Mitch McConnell and Sens. Chuck Grassley, of Iowa; John Cornyn, of Texas; Johnny Isakson, of Georgia; and Dan Coats, of Indiana.

Michigan's congressional delegation also wrote the agency last week, expressing "deep concerns" over the impact the cuts would have on more than 300,000 retirees under the plan in the state.

Kery Murakami is the Washington, D.C. reporter for CNHI's newspapers and websites. Reach him at [email protected]