Insurance

From the date health care reform was signed , we’ve been receiving a steady stream of messages from seniors who are anxious about what is going to happen to their healthcare under healthcare reform: Is Medicare Advantage going away? When will the doughnut hole disappear? Can I add my grandchild to my health insurance policy? I don’t qualify for Medicare yet; can healthcare reform help me find affordable health insurance?

We hear you and we understand … you love your Medicare Advantage and you don’t want it to go away under healthcare reform. Don’t worry! Medicare Advantage isn’t going anywhere under healthcare reform, however, several changes will occur that reduce funding and will effect some benefits .

What is Medicare Advantage?

Medicare Advantage plans offer seniors their Medicare benefits through private benefits instead of through the original Medicare Part A and Medicare Part B. A medicare advantage plan has to cover everything basic Medicare provides.  Most companies also offer additional benefits such as prescription coverage or gym memberships . For example, a Medicare Advantage health insurance plan offer less in some benefits, such as skilled nursing facility care, but it may balance that out with lower co-payments for doctors’ visits.

In order to get the Medicare Advantage plans off the ground with insurance companies , the federal government has provided subsidies to health insurance plans which offering Medicare Advantage. Most advantage plans have restrictions such as doctor and hospital networks and treatment co-pays, but some also offer extra services as well . It’s estimated that these subsidies were approximately $1,100 per Medicare Advantage member last year.

The low premiums are a key part or what make Medicare Advantage plans highly attractive as a health insurance option.

How Will Healthcare Reform Change Medicare Advantage?

First of all, we want to make this clear: Healthcare Reform is not doing away with Medicare Advantage program.

However, healthcare reform does change the way that the federal government reimburses Medicare Advantage plans . Most importantly, it does away with the subsidies which the federal government first used to establish the Medicare Advantage program ten years ago and which many Medicare Advantage health insurance plans use to offer their supplemental benefits.

These subsidies (which added an additional $14 billion to the Medicare program last year alone) will step by step be reduced until they are eliminated altogether. In 2011, these Medicare Advantage subsidy payments will be fixed at 2010 levels. After that, Medicare Advantage subsidy payments will be reduced an average of 12% per year until they are brought in line with traditional Medicare payments. It’s estimated that these reductions will be the equivalent of about $200 per Medicare Advantage member per year. According to the Congressional Budget Office, by 2019, Medicare Advantage plans will receive a total of $136 billion less than they would have received without these healthcare reform changes.

Even though the companies that offer Advantage plans have said they will keep the impact to a minimum , it is unlikely that most Medicare Advantage members won’t be affected in one way or the other. However, changes will be gradual and it’s unclear what the long-term effects will be as Medicare Advantage plans continue to compete for business and other healthcare reform requirements (such as having to spend 85% of payments on actual benefits) kick in.

We’ll keep covering these changes as they kick in, so stay tuned!