Smaller Hikes for Medicare Advantage Premiums

Almost 16 million Americans — about 30% of all Medicare beneficiaries — are enrolled in a Medicare Advantage Plan.1 If you’re among them, you might see an increase in your 2015 premiums, but you can be thankful that any increase should be less than was originally anticipated.

Medicare Advantage Plans, sometimes called Part C or MA Plans, are offered by private insurance companies approved by Medicare. These plans replace traditional Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) and often offer prescription drug coverage. They may also offer additional benefits not covered by Original (traditional) Medicare.

14114_ Smaller Hikes for Medicare Advantage Premiums

Federal Funding
Although beneficiaries pay premiums for Medicare Advantage Plans (typically in addition to the Part B premium), a large percentage of funding comes from the Medicare program, which pays a fixed amount each month for each beneficiary. On average, these payments are higher than the cost of care per beneficiary under Original Medicare.2

The Affordable Care Act (ACA) mandated changes to bring Medicare Advantage costs more in line with Original Medicare costs and to reward insurers that provide higher-quality care. In February 2014, as part of this ongoing effort, the federal government announced a 1.9% reduction in 2015 funding to Medicare Advantage Plans. In April, as a result of bipartisan Congressional opposition, as well as lobbying by the insurance industry and senior advocates, the government reversed its position and announced that funding would be increased by 0.4%. Insurance industry leaders claim that, in practice, this still represents a reduction over 2014 funding.3

When considering your 2015 expenses, keep in mind that Part C premiums vary among plans and may increase due to rising health-care costs, regardless of federal funding levels. You can make coverage changes during Medicare’s Open Enrollment period from October 15 to December 7. You can also change from Medicare Advantage to Original Medicare during an additional period from January 1 to February 14.

New funding guidelines for Medicare Advantage established by the ACA will be fully phased in by 2017, but efforts to reduce Medicare spending will probably continue indefinitely.4 However, bipartisan support for holding the line on federal funding may bode well for Medicare beneficiaries.

1–2, 4) Kaiser Family Foundation, 2014
3) Reuters, April 8, 2014


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