iProtean—Medicare Advantage Plans Scaling Back Networks, Benefits

Most major health insurance carriers offer Medicare Advantage plans, and the plans have been a lucrative line of business until recently. Because of recent sequestration cuts and rate reductions in the Affordable Care Act (ACA), Medicare Advantage plans will see payment reductions of billions of dollars ($135 billion in cuts over the next 10 years from ACA alone). (See iProtean Newsletter, October 15, 2013)


In response, some insurers are cutting physicians from networks, reducing plan offerings, trimming extra benefits and increasing patient cost sharing. (“Docs protest as insurers trim Advantage networks in reaction to rate reductions,” Modern Healthcare A.M., October 28. 2013)


A Medicare Advantage plan is a type of Medicare health plan offered by a private insurer that contracts with Medicare to provide Medicare recipients with all of the Part A and Part B benefits. These plans include health maintenance organizations, preferred provider organizations and private fee-for-service plans. Plans must meet Medicare minimum benefit requirements. More than 25% of Medicare beneficiaries nationwide belong to Advantage plans.


Many physicians around the country are getting notices from Advantage plans that they are being cut from private insurers’ networks. For example, UnitedHealthcare is shrinking its Advantage networks to 85% to 90% of their current size, according to one of its executives. Physician groups have criticized UnitedHealthcare over what they consider to be “abrupt” terminations in networks made without cause or explanation.


Although these plans are increasing in popularity (approximately a 10% increase year over year since the passage of ACA), they have received strong criticism from policy makers and analysts for their high costs relative to the traditional Medicare program. Rate cuts to the plans were included in the ACA, but insurance industry lobbyists succeeded in converting the rate cuts for this year into rate increases. Analysts predict payments to these plans will decrease by about 3.5 percent in 2014.


In 2012, according to the Medicare Payment Advisory Commission, payments to Advantage plans amounted to 107% of what the government spends on traditional Medicare enrollees, totaling $9 billion in additional spending. (“Docs protest as insurers trim Advantage networks in reaction to rate reductions,” Modern Healthcare A.M., October 28. 2013)



iProtean subscribers, please review the advanced course Value-Based Purchasing and Accountable Care Organizations for more information on Medicare Advantage plans in the context of accountable care organizations. In this course, expert Nate Kaufman urges hospitals to consider setting up an accountable care organization with a private insurer and/or with a Medicare Advantage plan rather than a Shared Savings Accountable Care Organization. If you have or are in the process of setting up a Medicare Advantage accountable care organization, it may be useful to receive an update from the insurer about the projected impact of sequestration and ACA cuts to your Medicare Advantage plan partner in your ACO.



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