Health insurers across the United States received a welcome surprise when they discovered that they will be receiving a 1.25% increase next year in Medicare revenue benefits. This declaration reverses a previous proposal by the U.S. government to decrease the amount of Medicare benefits that insurance companies would receive in order to bring it in line with other government programs for the elderly and disabled.
Medicare Benefits for Insurance Companies
The U.S. government has been slowly decreasing the amount of Medicare benefits received by insurance companies in a bid to bring private Medicare coverage equal to other government aid programs. This year, insurance companies received four percent less in benefits than 2014, and the original proposal for 2016 included benefits cuts of another 0.9%.
Instead, insurance companies like United and Humana will see an increase in benefits next year after a higher estimate of Medicare spending was released by the federal government. The director for the Center for Medicare stated that “Growth rates reflect the actuary’s best estimate of Medicare spending, and don’t reflect any change in our policies.”
Previous Cuts to Medicare Revenues
The main cost cutting measures have been aimed in previous years at the Medicare Advantage plan. U.S. spending on Medicare Advantage patients is estimated to be thirteen percent higher than for elderly individuals enrolled in traditional Medicare plans. Since the annual cuts that began in 2010, the federal government is now only spending about two percent more for people enrolled in the Advantage plan.
The lead representing body for insurance companies, America’s Health Insurance Plans, has argued that the annual cuts to insurance companies ultimately cause increasing costs of care for the elderly. In addition to providing more revenue for plans next year, the government is also instituting changes to the system to accurately reflect how ill an elderly patient is as well as their true cost of care.
Effects on Medicare Recipients
The U.S. government stated that it expects the increase in revenue next year to be at around 3.25% when accounting for the changes in Medicare patients’ diagnosis. One expert stated that “there’s good news in the growth rates and then tough pills to swallow with respect to some of the other proposals.” With around 15.8 million elderly and disabled people enrolled in the Medicare Advantage program, the potential effects of revenue decreases and increases can be great.
This is because of the differences in the funding system between that and a traditional Medicare plan. In the Advantage system, the federal government pays insurance companies a fixed amount for each person enrolled in the plan. Whereas, in the tradition Medicare system the federal government pays for each procedure performed on a patient that is covered by the Medicare guidelines. Increases in the revenue for the Advantage plan mean that insurance companies are better covered in case of catastrophic care needs in its Advantage members.