Reductions in Medicare Advantage Payments: The Impact on Seniors by Region

The Patient Protection and Affordable Care Act (PPACA) will cause millions of senior citizens and disabled Americans to lose billions of dollars in health care services every year by substantially reducing payments to Medicare Advantage (MA) plans. The act will also dramatically reduce the ability of Medicare beneficiaries to make health care choices for themselves.

Low-income beneficiaries and minorities, especially Hispanics, will bear the brunt of the MA cuts. About three-fourths of the cuts will hit those with incomes of less than $32,400 per year in today’s dollars. The loss of benefits will also vary widely by geography, with beneficiaries in the hardest-hit counties facing cuts almost five times as large as cuts for residents in the least-hit counties. In every county, the average beneficiary will lose at least 15 percent of his or her benefits. The secondary effects of these changes will also significantly increase spending on Medicaid and Medicare Part D.

The PPACA cut Medicare Advantage deeply to offset a portion of the new non-Medicare entitlement spending contained in the legislation. Phased in between 2012 and 2017, the MA cuts will substantially restrict the ability of Medicare beneficiaries to choose the health plans that best meet their needs and will result in substantial reductions in coverage for many millions of seniors and disabled Americans. According to the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), by 2017, when the changes are fully phased in, 14.8 million senior citizens and disabled Americans who would have had Medicare Advantage benefits under the previous law will be denied coverage for many services and incur higher out-of-pocket costs. About half will lose Medicare Advantage coverage entirely. Others will stay in Medicare Advantage, but at reduced benefit levels and possibly in different plans that do not meet their needs as well.

In this paper, we provide a brief background on the Medicare Advantage program and a description of the changes made by the new legislation. Most important, we provide quantitative estimates of the impacts of these changes on Medicare patients.

Read the entire study at heritage.org.

Click here to see the county-by-county table of Medicare Advantage disruptions.