On Sept. 21, it was announced that the average monthly premium in Medicare Advantage (MA) plans will drop to $35.69 in 2011–45 cents less than the average monthly cost in 2010. Here are some of the more interesting reactions to the news, as well as mine, in parentheses:

From MedpageToday:

“The Affordable Care Act gave us new authority to negotiate with health plans in a competitive marketplace. As a result, our beneficiaries will save money and maintain their benefits,” Centers for Medicare and Medicaid Services (CMS) Administrator Donald Berwick, MD, said. (CMS didn’t do that before PPACA? Come on.)

HHS Secretary Kathleen Sebelius said: “Despite lots of prediction of gloom and doom, the Medicare Advantage program is stronger than ever before. Significant reductions in the Medicare Advantage plans laid out in the ACA won’t take affect for another few years.” (But not this year, when we need to placate MA enrollees to keep from losing their votes.)

“With major changes in the pipeline, some insurance companies have decided to no longer participate in the program, while CMS rejected the bids of others after the companies proposed premium hikes that the agency felt were unreasonable and unjustified. The administration negotiated with about 300 Medicare Advantage plans and convinced them not to raise their premiums for 2011, said Jonathan Blum, deputy administrator and director of CMS’ Center for Medicare Management. (“…the agency felt were unreasonable and unjustified”?)

From The New York Times:

“The announcement on Medicare came as something of a surprise. Some members of Congress and some health policy experts had predicted that insurers would increase average premiums for Medicare beneficiaries in private plans. Medicare officials said they had held down premiums and co-payments by negotiating with insurers, which sponsor Medicare Advantage plans. We negotiated more aggressively than in the past,” said Jonathan D. Blum, deputy administrator of the Medicare agency. (Yep. “They” held down the premiums and co-payments by “negotiating.”)

John K. Gorman, a former Medicare official who is now a consultant with clients in the insurance industry, said: “Today’s announcement shows that there is a new sheriff in town. Medicare officials were very specific and very forceful. Insurers succumbed to the government’s demands and stayed in the Medicare market because they have become much more dependent on Medicare business. Payment rates for Medicare Advantage plans will generally be frozen next year at 2010 levels.”

In reality all of this is beneficial to your MA enrollees, and any reduction in premiums for your clients is good news. But, the reality of the announcement is cloaked in the politics of it all. And that’s too bad. Stringing out costs for future years is not a sensible solution, as many companies in the insurance industry have already learned.

Karen Ignagni, president of America’s Health Insurance Plans (AHIP), hit the nail on the head in a Sept. 21 National Underwriter article, summarizing the announcement: “Medicare Advantage rates are likely to increase rapidly after 2011 if current rules stay in place. Medicare health plans are doing everything they can to keep coverage as affordable as possible. But the Affordable Care Act freezes 2011 Medicare Advantage benchmark rates at 2010, meaning that Medicare Advantage plans will have no way to respond to increases in general health care costs, or the increases in Medicare physical reimbursement rates mandated by Congress. In the past, Medicare providers have responded to program funding cuts by trying to keep rates stable for a year of two, then ultimately dropping out of the market, AHIP says.”

And, my friends, that’s what happened when we called it Medicare+Choice a decade ago. But, then, politically correct announcements to gain retiree votes weren’t a factor. Be alert and stay tuned.

Ron Iverson is president and executive director of the National Association of Medicare Supplement Advisors, Inc.