Health Reform and Medicare Advantage

The Affordable Care Act, the Health Care Reform legislation signed into law in March, 2010, will bring about changes that hit hard and heavy in the Medicare Advantage program, the private provider coverage of Medicare Part C. These changes are designed to reduce the costs of Medicare and extend the solvency of the program for future generations. What is the impact of health care reform and Medicare Advantage on senior citizens?

Changes to Medicare Advantage Payments

The Medicare program pays Medicare Advantage insurance providers an average of over $1,000 more per person than traditional Medicare. The Affordable Care Act seeks to level the playing field by reducing payments to providers since allMedicare beneficiaries pay the price of these additional costs through higher premiums.

The reduction in reimbursements to providers will be phased in over three years -- payment rates will be frozen in 2011 and gradually reduced. Because Medicare payments are calculated on a location basis, the impact will vary by area.

Medicare Advantage Plans and Premiums

Medicare Advantage Plans may change as a result of these reduced reimbursement rates. Premiums may rise and some plans may reduce the extra benefits they provide. Opponents to the Affordable Care Act worry that some insurance companies may stop offering Medicare Advantage policies altogether. It's likely that this change will cause a reduction in Medicare Advantage enrollment from the current high of a 24% enrollment rate.

This analysis by the Kaiser Family Foundation discovered that 24%, or 11.1 Million Medicare recipients, were enrolled in private Medicare Advantage plans in 2010.

Health Reform Rewards Medicare Advantage for Results

There is currently a Medicare Advantage rating system that measures the quality of care for plans. It is administered by the Center for Medicare and Medicaid Services and is based on a five star rating system. Beginning in 2012, Medicare Advantage plans that receive four or more stars will receive a lower payment reduction.

In addition to this incentive, Medicare Advantage plans that pay less than 85% of their premium revenues into medical care (as opposed to administrative costs) will have to remit some of that profit to the federal government.

It is important for seniors to realize that while these changes may impact Medicare Advantage Plans, none of the legislation in the Affordable Care Act will leave them without health care coverage and changes are phased in over a period of time, which allows time to make informed decisions.