Reports, experts dispute Medicare Advantage ads

• Insurers%27 SEC filings dispute claims made by industry group
• Companies claim growth in Medicare Advantage premiums%2C memberships
• Latest Obama administration budget calls for lower payments to insurers

WASHINGTON — Claims made in a recent series of TV ads by the trade group for American insurance companies are disputed by the chief federal Medicare watchdog organization and the companies' own corporate filings, a USA TODAY analysis shows.

The ads from the Coalition for Medicare Choices, a subsidiary of America's Health Insurance Plans, say the Obama administration wants to cut too deeply from the Medicare Advantage program and those cuts would harm senior citizens on Medicare.

"The last time the Medicare Advantage program was cut significantly, millions of seniors across the country saw higher premiums, a reduction in benefits and loss of coverage," said a memo released Monday from America's Health Insurance Plans, which referred to cuts in 1997.

"The new cuts would have a devastating effect on seniors in the program," AHIP spokesman Robert Zirkelbach said. "We wanted to remind folks that we saw what happened last time payments were cut."

Medicare Advantage plans offer lower out-of-pocket costs than traditional Medicare does and often include more benefits, such as dental, acupuncture or health club memberships. About 28% of Medicare beneficiaries enroll in these plans. Medicare Advantage allows seniors to enroll in private plans, such as an HMO or PPO.

While the insurance industry says the cuts would hurt Medicare beneficiaries, enrollment in the program has grown since the passage of 2010 Affordable Care Act and insurers have gained customers, said Mark Miller, executive director of the Medicare Payment Advisory Committee (MedPac). Enrollment increased 9% from 13.3 million in 2012 to 14.5 million in 2013, Medicare records show, and MedPac's analysis shows growth will continue with no reason for lost benefits or lower insurer profits.

"We're seeing more enrollment with the same access," Miller said, adding that the plans have seen the same. "Their own data shows that enrollment is going to go up."

Baby Boomers also began aging into the Medicare system in 2011, creating a boon of 80 million potential customers by 2030, up from 47 million in 2011.

Corporate filings with the U.S. Securities and Exchange Commission show that many health insurers are gaining customers in their Medicare Advantage programs and that care isn't being hurt. For example:

•Humana, The 2013 annual report for the Louisville-based insurer shows Medicare Advantage membership was up by 200,000 people, or 9%, in December 2013 over the previous year.

"January 2014 individual Medicare Advantage membership increased approximately 250,000 members, or 12%, from December 31, 2013," the report states. Quality ratings, based on the Center for Medicare and Medicaid Services' star system, have improved: "We have 18 Medicare Advantage plans that achieved a rating of four or more stars, an increase of 50% from the previous year."

Beginning in 2015, plans with four or more stars are eligible for bonuses from CMS. Humana said an increase in net income was "driven by improved operating performance," including Medicare Advantage membership growth. Premiums grew $1.8 billion, primarily because of new Medicare Advantage members.

"The improved operating performance reflects our continued focus and executional discipline involved in key initiatives like our chronic care program, including increased care management, professional staffing and clinical assessments," the report states.

Plans that make such changes increase their profit margins and save the government money, Miller said.

•Health Net. At the end of 2013, California-based Health Net reported 244,424 Medicare Advantage members, an increase of 10,000, or 4.3%.

•Wellpoint. The Indianapolis-based company reported only Medicare Advantage Part D numbers because it is changing its Medicare Advantage plans into HMOs.

"We are pleased with our performance in 2013, which came in stronger than we expected even as we prepared for the implementation of the Affordable Care Act," Wellpoint said in a statement with its 2013 report. "We are encouraged by the trajectory of our membership, as we grew sequentially during the fourth quarter and expect to add over a million new customers in 2014."

NEW BUDGET PROPOSAL

The proposed cuts to Medicare Advantage providers in the Affordable Care Act, which would not translate into actual cuts for patients, were recommended by MedPac because those plans cost more than fee-for-service, or traditional, Medicare plans did. They come in part to ensure traditional beneficiaries and Medicare Advantage beneficiaries have similar amounts of money spent on them. Medicare Advantage was created because the health care management groups said they could keep costs down.

The law requires that Medicare Advantage plan benchmarks match those of fee-for-service Medicare plans, which tend to offer lower bids. In February, the administration recommended lowering the benchmarks 1.9% based on growth of costs to care for each beneficiary. Cost growth is at a historic low. Final rates will be announced April 7. MedPac, an independent, bipartisan agency established in 1997, recommended the changes for Medicare Advantage by a 16-0 vote for the first time in 2005. MedPac recommendations tend to be bipartisan and either unanimous or a close vote.

AHIP's new advertising campaign lambastes the cuts, citing "double-digit" cuts over two years and saying 2015 rates would be cut by 5.9%, according to analysis done by a company AHIP frequently hires.

AHIP hired Oliver Wyman, an international consulting group, to prepare an analysis that states that Medicare Advantage was cut by 6% in 2013. Wyman cited an Avalere Health analysis from September that showed "participation by Medicare Advantage plans will dip modestly in 2014 amid continued payment reductions enacted under the Affordable Care Act." Avalere found that the number of plans would drop from 2,664 in 2013 to 2,422 in 2014.

Health maintenance organizations, which provide managed care through one primary care physician who can refer patients to specialists, would provide more plan offerings, while preferred provider organizations, which allow a patient to pick any of a plan's providers without a referral, would provide fewer plans, according to Avalere.

Zirkelbach said 258 Congress members have signed letters to the Center for Medicare and Medicaid Services asking that Medicare Advantage seniors be "protected" from the cuts. AHIP has asked that payment rates remain the same for 2015 and launched television, newspaper and online advertisements promoting its message.

"There's significant bipartisan support," Zirkelbach said.

COMMITTEE STAFF SKEPTICAL

The Democratic staff of the House Energy and Commerce Committee, led by Rep. Henry Waxman, D-Calif., issued a memo last week calling AHIP's claims "exaggerated" and saying independent analysts, including Barclays and J.P. Morgan, have an "optimistic" view of Medicare Advantage.

"These independent analyses have found that Medicare Advantage enrollment will continue to grow, that insurers' Medicare Advantage businesses remain highly profitable and that many of the reforms announced by CMS will be positive for Medicare Advantage plans," the memo states. "J.P. Morgan also noted that some of the largest health insurers have seen better than expected financial returns in recent years, noting 'better growth than initially expected at [Humana], [Aetna], and [HealthNet], [and] growth instead of initially expected attrition at [Wellpoint].' "

The companies' corporate reports support the analysis' claim.

Miller said Medicare Advantage was originally sold to Congress as a way to beat fee-for-service programs, but Congress worked to make sure everyone had access to the program. The plans themselves should still have incentives to keep costs low.

"I suspect what you're going to see in the industry, and you're seeing this in HMOs, is they're going to figure out how to be more efficient," Miller said. "Each and every plan may not be able to do that — not every provider and hospital will bring costs down."

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