Medicare premiums drop, enrollment rises in health care law

WASHINGTON -- Medicare Advantage premiums fell while enrollment rose this year, despite predictions from opponents of the new federal health care law that it would drive down enrollment and force up premiums.

Department of Health and Human Services (HHS) officials said Thursday that enrollment will rise another 10% in 2012 and that premiums will fall 4%. Extra benefits in some Medicare Advantage plans, such as for vision or hearing, also are expected to remain the same.

The new statistics disprove the doom-and-gloom predictions of last year and show that because of the new law, HHS Secretary Kathleen Sebelius said, "Medicare is stronger than ever."

"On average, Medicare Advantage premiums will go down next year and seniors will enjoy more free benefits and cheaper prescription drugs," she said.

Medicare Advantage allows seniors to leave traditional Medicare and choose private health insurance plans, including health maintenance organizations or preferred provider organizations. However, the Office of Management and Budget found in 2009 that the program cost about 10% more than regular Medicare.

Last year, the independent and nonpartisan Congressional Budget Office (CBO) predicted that 2012 enrollment would increase slightly to 10.2 million, as opposed to the 13 million the Centers for Medicare and Medicaid Service now expects based on bids the agency has received from private contractors. Premium averages also went down about $3 from 2009 and are expected to decrease another dollar in 2011.

The health care law includes $145 billion in reduced payments to Medicare Advantage providers over 10 years. Critics said lower payments would force insurance companies to increase premiums, and that fewer people would enroll. The CBO predicted that by 2019, Medicare Advantage enrollment would decline by 35% because of a continued reduction in payments to providers.

Kathryn Nix, a health policy analyst at the conservative Heritage Foundation think tank, said the new statistics did not surprise her because allowing seniors to pick a private plan can "better suit their needs." She said the lower premiums also prove the private sector's ability to lower costs on its own.

A year ago, the Heritage Foundation predicted the health care law "will cause millions of senior citizens and disabled Americans to lose billions of dollars in health care services every year by substantially reducing payments to Medicare Advantage plans."

Nix said she still expects that decline to happen as payments continue to decrease.

"This is definitely not the best way to provide funds to Medicare Advantage," she said.

Jonathan Blum, deputy administrator of the Centers for Medicare and Medicaid Service, said the cost reductions came because of strong incentives, competition, better oversight and a simplified process to compare plans.

Humana, a large Medicare Advantage provider, stated in its latest quarterly report that it would keep cutting costs to "mitigate the adverse effects of the rates on our Medicare Advantage Members." Their Medicare Advantage membership increased about 10% from December 2010 to June 2011.

For WellPoint, a 4% enrollment boost made up for losses in non-Medicare services, its 2010 annual report said.