As we rapidly approach the 2015 Annual Enrollment Period, the two most asked questions are; what will happen with Medicare spending? And; how will it affect my Medicare?
First, depending on whom you listen to will affect the answer you receive. In early April the Obama Administration and CMS (Centers for Medicare and Medicaid Services) announced the planned cuts of 1.9% would be scrapped in favor of a .4% average increase for Medicare Advantage plans. The change in direction was dictated by severe bi-partisan opposition and lobbying from insurers on Capitol Hill. Humana Inc., one of the nation’s largest Medicare Advantage providers, said it expected to see a 3% year over year decrease in funding for 2015 plans. If history is any indicator, an average decrease in Medicare Advantage funding is on the horizon. Last year the administration claimed an increase in funding, only to have insurers experience a 6% cut in Medicare Advantage reimbursement rates.
Second, whether these cuts affect an individual’s Medicare Advantage plan will depend almost solely on the county in which they reside. Decreased reimbursement rates will mostly affect the counties with higher average cost of caring for Medicare beneficiaries. So, counties with higher population of Medicare beneficiaries will generally have larger provider networks enabling lower cost of care per beneficiary. In short the more rural the plan the higher the cuts in reimbursement rates causing a decrease in plan benefits. In turn plans in more urban areas will see less if any decrease in reimbursement rates.
Finally, these cuts will cause some insurers to pull their Medicare advantage plans out of specific counties entirely, or decreasing benefits so much that the plan is less attractive than original Medicare. For seniors whose plan is pulled from their counties, original Medicare is still provided as well as a Guaranteed Issue opportunity for a Medigap plan. The final tally will not be known for sure until October 1st, but checking your current plan and reviewing all options is more vital this year than ever before.