Enrollment Still Growing In Medicare Advantage Plans, GAO Says

Despite predictions that last year’s health law would doom Medicare’s private insurance plans, it’s not happening – at least not yet. Enrollment in Medicare Advantage plans continues to grow at a brisk pace, rising to 8.4 million beneficiaries by April 2011, about a 6 percent increase from April 2010, according to a new report from the Government Accountability Office.

Enrollment in health maintenance organizations (HMOs), which account for about two-thirds of total Medicare Advantage enrollment this year, increased by 9 percent, from about 5.2 million beneficiaries to about 5.6 million.

While local and regional preferred provider organizations (PPOs) make up a smaller portion of total Medicare Advantage enrollment, they experienced the highest percentage growth in enrollment, with local PPOs increasing by 38 percent and regional PPOs up by 58 percent, GAO reported.

The GAO report also found that on average, beneficiaries in Medicare Advantage (MA) plans actually paid lower premiums this year, falling to $24 from $28 last year, about a 14 percent reduction. These premiums are paid in addition to the Medicare Part B premiums that the beneficiaries pay each month.

As part of the 2010 health law, federal payments were frozen to Medicare Advantage plans this year and will drop by less than 1 percent in 2012. Larger payment declines are set to kick in later this decade.

The plans were targeted by Democrats, who complained that the government pays more per capita for beneficiaries in the private plans than it spends on those in traditional Medicare. According to the Medicare Payment Advisory Commission, this year Medicare will spend on average 10 percent more for beneficiaries enrolled in MA plans than if those beneficiaries were in fee-for-service Medicare.

The billions of dollars cut from the MA plans were allotted by Congress to help pay for the cost of expanding coverage to 32 million uninsured Americans through expanded Medicaid eligibility and subsidies for people buying coverage in new insurance exchanges starting in 2014.

MA plans generally provided coverage in 2010 and 2011 for additional benefits, such as hearing and vision, beyond those offered by traditional Medicare. But there were some changes in the percentage of beneficiaries with certain benefits, according to GAO. The percentage of MA beneficiaries with coverage for vision services decreased from 84 percent to 79 percent.

While the health law’s changes had little impact on MA enrollment this year, more changes may be in store. The GAO report notes that the Congressional Budget Office has predicted that those $136 billion in cuts to MA plans would decrease enrollment by about 35 percent through 2019. The Office of the Actuary at the Centers for Medicare and Medicaid Services has found that the reduction in MA payments would eventually lead to those plans offering less-generous benefit packages.

But the GAO report adds: “It is uncertain what impact, if any, these payment changes have had thus far on MA plan enrollment, the premiums and cost sharing they require from beneficiaries, and the additional benefits they offer.”

KHN staff writer Phil Galewitz contributed to this report.