september 21, 2010 - New York Times

Medicare Advantage Premiums to Fall in 2011

By Robert Pear

WASHINGTON — The Obama administration announced Tuesday that average premiums paid by individuals for private Medicare Advantage plans, which insure about one-fourth of all elderly beneficiaries, would decline slightly next year, even as insurers provide additional benefits required by the new health care law.

The announcement came as something of a surprise. Some members of Congress and some health policy experts had predicted that insurers would increase premiums for Medicare beneficiaries in private plans.

“Despite the claims of some, Medicare Advantage remains a strong, robust option for millions of seniors who choose to enroll or stay in a participating plan,” said Dr. Donald M. Berwick, the administrator of the federal Centers for Medicare and Medicaid Services.

Insurers can begin marketing to beneficiaries on Oct. 1 for Medicare coverage that starts Jan. 1.

Medicare officials said they had been able to hold down premiums and co-payments through negotiations with insurers, which sponsor the Medicare Advantage plans.

The new law gave officials new power to negotiate and to reject bids, as they did in a few cases.

“We negotiated more aggressively than in the past,” said Jonathan D. Blum, deputy administrator of the Medicare agency. “As a result, some plans changed their bids to produce more value for beneficiaries.”

“On average,” Mr. Blum said, “Medicare Advantage premiums will be 1 percent lower in 2011 than today. Medicare Advantage plans project that enrollment will increase by 5 percent in 2011.”

About 11.3 million of the 46 million Medicare beneficiaries are in private Medicare Advantage plans, which offer comprehensive care in return for monthly premiums.

In the yearlong fight over health care, President Obama repeatedly said that the government was overpaying Medicare Advantage plans. He denounced what he described as “unwarranted subsidies in Medicare that go to insurance companies — subsidies that do everything to pad their profits but don’t improve the care of seniors.”

Over objections from insurers, Congress cut federal payments to the private plans. The cuts are expected to save $136 billion over 10 years.

Kathleen Sebelius, the secretary of health and human services, said Tuesday that the negotiations with insurers showed they “remain committed to the Medicare Advantage program.”

While reviewing bids, Medicare officials said, they identified 300 private plans for further scrutiny.

“These plans unfairly proposed to increase out-of-pocket expenses for beneficiaries while increasing their own profit margins,” Dr. Berwick reported. “We said no, you have to do better.”

Medicare officials negotiated changes with most of the 300 plans. “As a result of these negotiations,” Mr. Blum said, “plans improved their benefits by $13 per member per month, or 5 percent, on average. The average reduction of about $155 per member per year for the 966,000 beneficiaries resulted in estimated total savings of $150 million for beneficiaries in 2011.”

Ultimately, seven Medicare plans offered by three insurance companies decided not to change their bids, and “we denied those bids,” Mr. Blum said.

Payment rates for Medicare Advantage plans will generally be frozen next year at 2010 levels, with rates subject to tighter constraints in subsequent years, federal health officials said.