Medicare Advantage Plans See Lower Premiums, Higher Enrollment

Premiums for Medicare Advantage (MA) plans have fallen an average of seven percent over the past year, and enrollment in MA plans rose by ten percent during that time period, according to a news release issued by HHS on February 1, 2012.  This is despite the predictions of insurers, Republicans, and opponents of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) who claimed that enrollment in Medicare Advantage plans would decrease while premiums would increase under PPACA.  Since the enactment of PPACA in 2010, premiums have dropped by 16 percent and enrollment has increased 17 percent.  Specifically, enrollment in MA plans rose from 11.7 million in 2011 to 12.8 million in 2012, and premiums dropped from an average of $33.97 in 2011 to $31.54 in 2012, according to the news release.

Under the Medicare Advantage (MA) program, created in 2003 as the Medicare+Choice (M+C) program, CMS contracts with public or private insurers to offer a variety of health plan options to Medicare beneficiaries, including health maintenance organizations (HMOs), provider sponsored associations (PSOs), preferred provider organizations (PPOs), and private fee-for-services (FFS) plans.  These MA health plans provide beneficiaries with Part A and Part B benefits, and sometimes additional benefits beyond the original Medicare offerings.

Pursuant to PPACA, payments to MA plans will be cut by about $136 billion during the next ten years according to an article from The Washington Post.  The trade group, America’s Health Insurance Plans (AHIP), was also cited as stating that “millions of seniors in Medicare Advantage will lose their coverage, and millions more will face higher premiums and reduced benefits.”  In a collaborative article appearing on the Kaiser Health News (KHN) website, this trade group’s spokesman, Robert Zirkelbach, further claimed that, as a result of the cuts mandated by PPACA, “beneficiaries will face higher out-of-pocket costs, reduced benefits, and fewer health care choices.”   Zirkelbach also cited a Congressional Budget Office (CBO) projection that MA enrollment will drop by 7.5 million by 2018 as a result of PPACA.

Even back in September 2011, however, the Obama administration predicted that premiums would decrease by four percent during 2012, and enrollment would increase by one percent.  The current figures have surpassed that estimation.  Three reasons were cited in the article for the recent changes in enrollment and premiums, and the reduced pressure on Medicare, generally, including:

1. Medicare costs are not growing at quickly as in recent years, as was also discussed in this recent blog post.  The article credited the recession, which causes a lower utilization of services, for the lower growth rate in expenditures.

2. Medicare beneficiaries are healthier, on average, and younger.  A large amount of the Medicare risk pool is around 65 years of age, and thus are cheaper to insure than older beneficiaries.

3. Prescription drug prices are lower, due to some popular, brand-name drugs coming off patents.  This also resulted in lower premiums for Medicare Part D, the prescription drug plan, for 2012.

HHS Secretary Kathleen Sebelius cites PPACA for the change, and specifically, the “unprecedented new tools [HHS has] to ensure that seniors and people with disabilities are getting the best value out of their coverage, according to the news release.  The strength of the MA program is further emphasized in the news release; nearly every county in the country has an average of 26 MA plans to choose from and 99.7 percent of Medicare beneficiaries have access to a MA plan.  According to CMS Acting Administrator Marilyn Tavenner, “plans are better, with more beneficiaries enrolled in 4- and 5-star plans.  The Affordable Care Act has strengthened Medicare Advantage by motivating plans to improve the quality of their coverage.”

The most recent MA and Part D contract and enrollment data publicly available is available at: