Obama Administration Cuts Public Part C Medicare Advantage 10%-15% for 2015

The so-called final 2015 Announcement is out for 2015 Part C Medicare Advantage health plans and it looks like the Obama administration -- which has been gunning to get the 15,000,000 seniors and disabled people on public Part C Medicare Advantage health plans for years -- has decided to get them all at once.

The 2015 announcement calls for 4% cuts in National Per Capita MA Growth Percentage and 3% cuts in the National Medicare Fee-for-Service (FFS) Growth Percentage. In 2013, Obama raised both those percentages about 3% and that still led to a 6% cut in Medicare Advantage benefits for seniors on average. So -- all other things being equal (they never are) -- this 7% adjustment down from the year we're in means public Part C Medicare Advantage health plan benefits will be cut between 10% and 15% for 2015 (details to be announced around October 1, 2014).

That does not mean premiums will be increased 10%-15%. Typically the cuts come as a mix of

• premium increases on the popular plans (do not confuse the premiums on the popular plans with the propaganda the government puts out about average plan prices) and
• benefit cuts (more restrictive provider networks, much higher annual out of pocket spending limits, higher co-pays and deductibles¹)

But the combination of both premium increases and benefits cuts will exceed the Oliver Wyman estimate of from $420 to $900 a year in higher out of pocket expenses for seniors -- all other things being equal. The Obama administration has said in other context that it wanted to cut the subsidy to public Part C Medicare Advantage beneficiaries by an average of $20 billion a year through 2025. But the government body in charge of Medicare statistics says Medicare only paid $8 billion in extra subsidies to these beneficiaries in 2013 and 2014. 

So it looks like Obama is going for the "full Ignani" and -- given the cuts already made to acute-care hospitals and to rehab services for Original Democratic Party Medicare beneficiaries -- taking out much more than he even needs to fund insurance subsidies for those under 65. This affects two groups quite differently:

• Medicare Advantage beneficiaries are disproportionately poor and minority seniors, a group that will be forced back on the Medicaid from when they came before Part C was improved in 2003 (to be later cut beginning in 2010).
• Despite the full court PR press by Ms. Ignagni and the old guy with the binoculars, the insurers really don't care because they will make up for the lost revenue from the poor as a large percentage of the middle class seniors with a public Part C Medicare Advantage supplement will have to move to much more expensive, less useful private Medigap supplement plans (a category that has been dying since 2003).

¹With such cuts, public Part C Medicare Advantage benefits are still better than Orginal Democratic Party Medicare which has no annual out of pocket spending limit, thousands of dollars in potential co-pays and deductibles, and life-time limits. But this will be the start of the Obama-desired Part C death spiral as fewer and fewer Part C plans are offered by insurers (already down 50% since PPACA was passed) and fewer and fewer doctors are available in the tighter networks... leading to higher prices and fewer doctors and less subscribers... and so forth and so forth