Why is Medicare Advantage doing so well in the face of budget cuts? Experts can’t wrap their heads around the phenomenon.
Since Congress approved $150 billion cuts to the program as part of the Patient Protection and Affordable Care Act in 2010, enrollment in Advantage plans has soared to 17 million, up from 11 million at the time of the bill’s passage.
The New York Times notes that the eagerness with which beneficiaries and insurers have approached Medicare Advantage in the face of cuts contrasts starkly with the wobbly existence of the PPACA individual marketplace, which has not enrolled nearly as many as expected and which some insurers have suggested is not profitable enough to participate in.
But even with reductions in reimbursements for Medicare beneficiaries, the health program for senior citizens is a far more profitable endeavor for major insurance companies.
They are still getting an average of $10,000 per beneficiary per year from the federal government.
While insurers participating in the PPACA marketplace have faced claims that exceed the revenue they get through premiums (paid by individuals and the federal government), those participating in Medicare Advantage are still enjoying healthy profit margins.
As Richard Foster, the former chief actuary for Medicare Advantage, explained to the Times: “The marketplace under the Affordable Care Act will calm down over time but may not ever be as stable and predictable as Medicare Advantage.”
What does stability mean?
Well, it means that unlike in the individual marketplace, whose leaders labor mightily to convince young, uninsured people to sign up for high deductible plans that they don’t anticipate benefiting from, Medicare Advantage gets a steady stream of retirees who have already paid for much of the benefit they’re entitled to.
And unlike younger people, the Medicare population doesn’t move around the country and through the labor force much, meaning they are less likely to switch plans from year to year.
And of course, while one party has stated it is committed to dismantling the PPACA, both parties are committed to supporting Medicare in one form or another for the foreseeable future.
So while insurers worry as Republicans threaten to cut billions of dollars in funds to “risk corridors” to help insurers that have lost money on the PPACA exchanges, there are not similar concerns about the future of Medicare.