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The Centers for Medicare and Medicaid Services has raised questions about whether it wants to keep the Medicare Advantage plan program in place in 2027, by proposing that it increase the underlying subsidy level the issuers receive by just 0.09%.
The 0.09% could amount to a large subsidy cut for many issuers, because CMS actuaries have predicted in their latest national health expenditure forecast that overall Medicare health care expenditures will increase 8.8% in 2027, to $1.4 trillion.
CMS put the near-zero increase proposal in a new advance notice for the 2027 Medicare Advantage and Medicare Part D prescription drug plan bidding process.
The notice will be subject to a vigorous negotiation process, and the issuers have often managed to persuade CMS to increase the expected average change in payments. For 2026, issuers won a final increase of 5.06%, up from an increase of 2.23% included in the advance notice for 2026.
But the new notice is the third in a row that reflects a tough federal approach to program funding, and America's Health Insurance Plans, a group for health insurers, predicted in a statement that holding program funding flat at a time when costs are rising sharply will impact enrollees' coverage.
Mary Beth Donahue, the president of Better Medicare Alliance, said the notice "falls short of what is needed to provide stability."
Timothy Noel, chief executive officer of the health insurance arm of UnitedHealth, the biggest private Medicare plan issuer, said today during a conference call with securities analysts that letting the 2027 subsidy increase stay at 0.09% would lead to a "profoundly negative impact" on enrollees' benefits.
The notice "simply doesn't reflect the reality of medical utilization and cost trends," Noel said.
What it means: Advisors who found themselves having to bone up on Medicare plan intricacies to respond to clients' anguish about 2026 coverage changes may find when enrollment for 2027 coverage begins that talking about Medicare will take up much more of their time.
Medicare plan basics: Medicare Advantage is a federally regulated program that uses a combination of federal funding and some premium revenue to provide what looks to the enrollees like an alternative to original Medicare.
Private health insurers help the enrollees pay the "original Medicare" deductibles, coinsurance payments and copayments and get access to extra benefits, such as dental cleanings. The program now covers about 36 million of the 70 million Medicare enrollees.
About 14 million enrollees use another type of coverage, state-regulated Medicare supplement insurance, to fill in the coverage holes in original Medicare.
The current Medicare Advantage program is a replacement for an earlier private Medicare plan program, the Medicare+Choice program. Medicare+Choice began to implode in 2001, when insurers started to flee the program because of what they believed to be unrealistically low federal funding levels.
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