Obamacare’s Reviled Medicare Cuts Have Turned Out Better Than Expected

While glitches continue to trouble insurance exchanges, another controversial part of the law has been a surprising success

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People show their support for the Affordable Care Act during a rally in front of the Stephen P. Clark Government Center in Miami, on Oct. 10, 2013.

While the new Obamacare insurance marketplaces have been plagued by dysfunction, an existing coverage program curtailed by the health care law appears to be working quite well. In fact, it’s even more attractive to consumers than before reforms put in place by the Affordable Care Act (ACA).

Back in 2009 and 2010, one of the harshest criticisms of President Obama’s health care law was that it would hurt seniors. The law’s $700 billion in cuts to Medicare over 10 years would deprive seniors of benefits and choices, critics said. Of particular concern was the plan to cut more than $100 billion out of a quasi-governmental program called Medicare Advantage, which allows seniors to get government-funded private insurance plans in place of traditional Medicare.

Four years later, with the ACA in place, it appears that worries about the future of Medicare Advantage have not come to fruition — at least not yet. The program is more popular than ever. Between 2010 and 2013, enrollment in the program increased 30%, defying the expectations of some of the top policy experts in Washington.

But Republicans have not given up. Some still say the program is in jeopardy thanks to Obamacare. “The chances are that soon [seniors] will open up the mail to the bad news that your Medicare Advantage … has been changed in a negative way for you because of Obamacare,” said Senator Marco Rubio recently, even though premiums, plan choices and benefits under Medicare Advantage have remained stable even with less money for the program.

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“So far, the concerns have not been borne out,” says Tricia Neuman, a senior vice president at the Kaiser Family Foundation who studies Medicare Advantage. “Enrollment continues to climb. Some of the forecasts have predicted that plans would pull out and people would drop out — so far it hasn’t happened.”

When Medicare open enrollment begins on Oct. 15, the approximately 14 million seniors who choose Medicare Advantage will find options that are, in many cases, better and only marginally more expensive than in the past. According to the U.S. Department of Health and Human Services (HHS), which oversees Medicare, the average Medicare Advantage monthly premium will increase only $1.64 in 2014, compared with in 2013. Of benefits and cost sharing, Gretchen Jacobson, also of Kaiser, says, “We haven’t seen dramatic changes.” Authors of the ACA originally targeted Medicare Advantage for cuts because the federal government was spending about 14% more per enrollee in the program than for those enrolled in standard Medicare. The ACA’s cuts to the program began in 2012 and will continue until 2017.

But the program has been cushioned by a new HHS initiative that awards bonus payments to insurers selling higher-quality plans. While the bonus program was authorized by the ACA, the federal government increased its funding in 2012, drawing scrutiny from the Government Accountability OfficeSome Republican lawmakers accused HHS of trying to mitigate negative effects of the ACA cuts before the 2012 elections. The payments may have softened the effects of cuts to Medicare Advantage, but the bonus payments totaled less than half of all cuts to the program so far under the ACA, according to Jacobson. In addition, the bonus payments may be responsible for the fact that more seniors will be enrolled next year in plans receiving four of five stars, in an HHS rating system, than in 2013.

While the full impact of Obamacare on Medicare Advantage cannot be measured until 2017, when all new cuts are in place, it appears that so far, the program has not suffered because of the law.

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