Who’s Really Cutting Medicare?

Advantage plans are reducing benefits and raising costs after Biden cut payments

WSJ editorial. 

"Medicare’s open enrollment period began Tuesday, and seniors may be in for a shock when they discover that their health plans next year will come with fewer benefits and higher costs. Call it the Biden Administration’s October surprise. 

About half of seniors are enrolled in Medicare Advantage plans that are administered by private insurers with government funding. These have become increasingly popular because they cost less than traditional Medicare and provide added benefits like dental and vision care. They do a better job of controlling costs and keeping seniors out of the hospital.

The flip side is that insurers limit provider networks and can throw up bureaucratic obstacles to procedures and treatments that they deem not medically necessary. Democrats have long sought to undermine the program because they dislike private competition.

For the past two years the Administration has slashed payments to Advantage plans even as costs and utilization have been increasing. Baby boomers need more joint replacements and other procedures as they get older. Hospitals and physicians are passing on their rising costs to insurers in new contracts.

Berkeley Research Group projected that Medicare Advantage medical costs will climb 4% to 6% next year. This is creating a financial squeeze for insurers. The Administration says its Advantage cuts are nothing to worry about because plan premiums are expected to remain stable next year. This ignores that insurers are scaling back offerings and benefits.

Two of the largest Advantage insurers, CVS and Humana, have announced they are canceling plans that are losing money. About 7.1% of Advantage enrollees will have to find another plan next year because theirs is being terminated, up from 0.4% to 1.5% during the past four years. Most plans will also be skimpier.

An estimated 78% of plans next year will offer assistance with over-the-counter drug spending compared to 87% this year. Nearly all plans will still cover dental and vision care, but typically at lower levels.

Deductibles and out-of-pocket spending limits are also rising, which will smack sicker seniors. Drug deductibles will on average be 167% higher next year. Two-thirds of Advantage enrollees will see their drug deductibles climb by at least $200 next year. The median out-of-pocket spending maximum for Advantage plans will increase to $5,400 from $5,000.

A big draw of Advantage plans is they have out-of-pocket maximums unlike traditional Medicare. But the Administration’s cuts are spurring insurers to increase seniors’ out-of-pocket costs and scale back benefits, thereby making the plans less attractive. That’s the Democrats’ political goal.

As a distraction, they are boasting about the Inflation Reduction Act’s $2,000 cap on Medicare out-of-pocket drug spending. But there’s no such thing as a free benefit, and the cap is one reason Advantage plans are raising drug deductibles next year.

Kamala Harris is campaigning on “strengthening” traditional Medicare by extending coverage to home health, dental and vision care. But at the same time the Administration is curtailing benefits by squeezing Advantage plans. Democrats say Donald Trump wants to slash Medicare, but who’s really cutting the program?"