Two campaign claims are being made in Colorado's U.S. senate race about the Affordable Care Act and seniors. Political ads are often designed to scare or anger people rather than inform them, and that sure seems to be the case here.
Claim No. 1
The Affordable Care Act "cleared the way for cuts to Medicare Advantage," and "didn't protect Colorado seniors" but instead puts "them in harm's way."
Medicare Advantage (MA) is the private insurance version of traditional Medicare. MA plans must cover all of the traditional Medicare benefits, but they have additional benefits, for which policyholders pay extra. More than 256,000 Coloradans are enrolled in Medicare Advantage plans, and they represent about 36 percent of the state's total Medicare population.
The federal Medicare program reimburses Medicare Advantage insurance companies for the cost of traditional Medicare coverage. Prior to the Affordable Care Act (ACA), MA plans were paid 14 percent more on average per enrollee than for enrollees in traditional Medicare. That translated into an additional $1,280 per MA enrollee, or about $14 billion in higher payments to insurance companies. Those excess payments contributed significantly to concerns about Medicare's long-term financial solvency. In 2009, it also meant an additional $40 per year in Part B premiums for all Medicare beneficiaries. The excess payments were also ironic, since one of the big selling points for Medicare Advantage legislation in the late 1990s was that its reliance on private-market insurance would reduce long-term Medicare spending.
In response, the ACA included provisions to reduce MA overpayments while at the same time providing incentives for improvements in quality. The transition to lower rates began in 2012 and is scheduled to end in 2017. Between 2009 and 2014, those reimbursements were reduced by an average of 8 percent. Even so, in 2014, MA plan reimbursement rates are still about 6 percent higher than traditional Medicare.
Additionally, while cuts were implemented over the last two years, because of reductions in overall Medicare spending, reimbursement payments to MA carriers will actually increase rather than decrease in 2014 and 2015.
It's also illegal under the ACA for Medicare Advantage plans to reduce or eliminate traditional Medicare benefits.
With one exception, the impact of these provisions on Medicare Advantage coverage has been pretty minimal. Nationally, according to the Federal Department of Health and Human Services:
• Nearly all beneficiaries (99 percent) continue to have access to an MA plan in their area in 2014.
• MA enrollment has increased by more than 30 percent since the enactment of the ACA.
• Average MA beneficiary premiums have decreased by 10 percent since the ACA was passed.
• Total revenues for MA insurers have increased by 29 percent.
• Plan quality has improved, with more than half of all MA policyholders enrolled in plans with four or more "quality stars." More than one-third of all MA contracts have four or more quality stars in 2014, compared to only 14 percent in 2011.
If there is a downside for MA policyholders, it may be the potential impact on provider networks. The biggest overhead cost for insurance companies is the direct cost of health care, and they frequently adjust or reduce their provider networks to better manage costs and profits. UnitedHeathcare, one of the two leading MA plan providers, has reduced its national provider networks by some 30,000 physicians over the last two years. The company's stated goal is to reduce its networks by 10 to 15 percent over last year.
So, in general, enrollment in MA plans has increased, costs are being controlled, no benefits are being cut and most plans get high marks for quality.
Claim No. 2
The Affordable Care Act "raided $716 billion from Medicare to pay for Obamacare."
This claim implies that Medicare spending was cut simply to pay for other provisions in the Affordable Care Act. The ACA does, indeed, reduce the growth in Medicare spending, but those reductions are based on efforts to improve efficiencies and reduce waste and fraud, all of which are designed to extend the solvency of the program.
It's important to remember that before the ACA was passed, the Medicare Part A Trustees Board projected that Medicare would become insolvent in the year 2016. Insolvency means that Medicare would be spending more money than it would be receiving in funding. Since Medicare has almost 50 million enrollees, insolvency would have had serious consequences for the long-term sustainability of Medicare, as well as other federal programs that aren't even related to seniors or health care. In short, spending reductions were necessary.
It is also important to understand the goal of these spending reductions. In 2012, hospital and Medicare Advantage costs represented about 55 percent of all Medicare spending. As a result, almost 70 percent of all of the ACA's spending reductions focus on payments to hospitals and Medicare Advantage plans, not individual physicians, beneficiaries or benefits.
And since the passage of the ACA, the solvency picture for Medicare looks a lot better. The latest projection from the Medicare Trustees Board has extended the solvency of Medicare through 2030. A major reason for that 14-year extension is the ACA's spending reductions.
Perhaps the best evidence for the likelihood of Medicare spending cuts is the budget proposal passed by the U.S. House of Representatives in every session since 2011. That party-line proposal does nothing to reinstate the ACA's Medicare spending reductions. In fact, it proposes sweeping reforms that would reduce overall spending by turning Medicare into a premium-support program. Under this plan, American seniors would be provided with a predetermined stipend that could be used to purchase private insurance or traditional Medicare coverage. While this would not affect current seniors it would apply to future Medicare beneficiaries over a targeted age. In addition, the budget plan would also reduce Medicaid spending (which is the only public safety-net program that funds long-term care for low-income seniors) by appropriating funding through block grants to the states.
Regardless of the merits or disadvantages of those proposals, both reforms significantly reduce federal Medicare and Medicaid spending. To imply that one approach will cut senior programs while the other will not is simply untrue.