Medicare Advantage Enrollment Up Despite Budget Cuts

Since Congress approved $150 billion cuts to Medicare as part of the Patient Protection and Affordable Health Care Act in 2010, enrollment in Advantage plans has shot up by more than 50 percent, puzzling experts.

Over five years ago, Congress passed President Obama’s signature health law, helping to offset costs by cutting payments to Medicare Advantage plans. According to the New York Times, many Republicans and insures thought it would destroy the program. The Congressional Budget Office predicted that enrollment would fall about 30 percent.

In actuality, over 17 million people are now enrolled in Advantage plans, up from a little over 10 million in 2010. Nearly one-third of Medicare recipients have chosen private plans, offered by insurers like Humana and UnitedHealth Group, over the traditional Medicare program.

The New York Times notes that it has taken massive efforts by the Obama administration and by insurance counselors to sign up to 12 million people — far less than the enrollment of 21 million in 2016 originally projected by the budget office.

But even with reductions in reimbursements for Medicare beneficiaries, the government pays insurers, on average, $10,000 a year per person — a total of more than $170 billion.  This proves that Medicare is a far more profitable endeavor for major insurance companies. Insurance executives say that well-run Medicare Advantage plans can often count on profit margins of 4 percent to 5 percent; even with the health law’s spending reductions.

Despite the fact that insurers participating in the PPACA (Patient Protection and Affordable Care Act ) market have faced claims that surpass the revenue they get through premiums (paid by individuals and the federal government), those participating in Medicare Advantage still benefit from exceptional profit margins.

Richard Foster, the former chief actuary for Medicare Advantage, explained to the New York Times: “The marketplace under the Affordable Care Act will calm down over time but may not ever be as stable and predictable as Medicare Advantage.”

What does this mean? explains it best.

It means that unlike the individual marketplace, whose leaders work effortlessly to convince young, uninsured people to sign up for high deductible plans that they don’t anticipate benefiting from, Medicare Advantage gets a steady stream of retirees who have already paid for much of the benefit they’re entitled to.

And unlike younger people, the Medicare population is less likely to switch plans from year to year.

Although there have been statements made about dismantling the PPACA, both parties are dedicated to supporting Medicare, in some form or fashion, for the foreseeable future.

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