“If you like your health care plan, you can keep it” is a promise that rings in political infamy. The magnitude of the deception has only begun to become apparent.
Certainly, the administration thought it was in hot water over millions of canceled individual-market policies in 2013. It better brace itself, though, for the wrath of seniors who will suffer the fallout of the budgetary attack on Medicare Advantage plans.
Obamacare financed its assault on existing insurance arrangements in part by $156 billion over 10 years in direct cuts to Medicare Advantage plans — cuts to be exacerbated by indirect spillovers from changes in the Medicare Advantage funding formula.
It is inevitable that funding cuts will take their toll on these plans. By my math, the Kaiser Family Foundation’s 2014 Medicare Advantage Spotlight shows that seniors enrolled in 349 Medicare Advantage plans received cancellation letters, and a portion of the seniors enrolled in 194 plans were advised that their plan no longer operated in their region.
That’s a pretty big market adjustment (26 percent of 2,074 plans), considering that only 4 percent of the anticipated Medicare Advantage cuts have transpired.
The administration could try to respond to plan cancellations using the same playbook as with the individual market — dismissing those as “inferior” plans.
That excuse will not hold up in the ever-popular Medicare Advantage program, though. All plans must meet a minimum level of services, and must compete on the merits of price and quality for Medicare beneficiaries.
Instead, the administration will be forced to admit to seniors that it gutted a well-liked and efficient program to funnel the money into Healthcare.gov and other misadventures.
Will the Obamacare crafters own up to asking seniors on a fixed income to pay more for their health care so subsidies can be given to families making four times the federal poverty level?
The consequences extend beyond the political fallout. There is a bipartisan consensus that Medicare must be modernized.
The acute-care model of the 1950s is out of step with chronic conditions and multiple co-morbidities that are the characteristics of the senior population. Fee-for-service Medicare promotes inefficient overutilization and fails to coordinate care among multiple providers.
Obamacare contains speculative changes in traditional Medicare to address these deficiencies, but the plain fact is that the only proven, existing — if not uniformly perfect — approach to coordinated care is Medicare Advantage.
Seniors in 75 percent of Medicare Advantage will get to “keep their plan” (at least this year). However, keeping their plans might not mean keeping their doctors, keeping their affordable premium or keeping their benefits.
The insurance companies that continue to offer their plans in 2014 and beyond have to find ways to absorb the sharp payment reductions and have a limited number of mechanisms to do so.
The options: raise premiums, reduce the optional benefits, pull out of certain counties, increase cost-sharing, or limit physician and hospital networks. This is a menu of potential to harm seniors’ finances and health care choices.
When some of the largest insurance firms in the country are unable to absorb the payment cuts and have to cut significant numbers of physicians from their networks, there is little hope for smaller plans and, more importantly, the seniors who rely on them.
More disruption will come next year unless the administration exercises its discretion to block further Medicare Advantage cuts.
The political consequences of the deceptive Obamacare marketing cannot yet be understood. More important, though, is avoiding the predictable damage to the health care options of seniors and the effectiveness of a pillar of seniors’ health care.
Douglas Holtz-Eakin, a former director of the Congressional Budget Office, is president of the American Action Forum.