Anticipated Medicare cuts dreaded by health insurers

Health insurers are dreading the upcoming Medicare cuts set to be announced this Friday. The U.S. government will publicize the proposed payment rates for insurer-run Medicare plans in 2015, with the final rate announcement expected April 7. According to industry officials, these cuts will mean higher co-pays and fewer benefits for seniors.

Each February, the Centers for Medicare and Medicaid Services proposes reimbursement rates that it agrees to pay insurers for managing the privately run programs, publishing a final rate 45 days later. These cuts will affect more than 50 million Americans whose health care is covered through Medicare. About 15 million are enrolled in Medicare Advantage plans while the rest use Medicare fee-for-service programs, in which doctors are reimbursed by the government for patient visits and procedures.

Health insurers expect a proposed cut of 6 to 7 percent, in which case they warn they will have no choice but to pass on a significant portion to seniors if they are to keep their businesses intact.

Aetna, which has about 1 million Medicare Advantage members, said that to maintain recent costs, it has implemented cost-effective efforts.

"If you can't solve the reduction based on those activities, then you have to resort to things that are much more visible to the beneficiaries, which can range from benefit reductions, and either premium increases or the introduction of a premium," Fran Soistman, executive vice president and head of Government Services at Aetna, told Reuters.

Insurers can look to other alternatives like they did last year when the government made nearly 6 percent cutbacks.

"The concern is that a second consecutive 6 percent cut to the program will be devastating for seniors," said Robert Zirkelbach, spokesman for the lobbying group America's Health Insurance Plans.

And with President Barack Obama's healthcare law, the Affordable Care Act, in the hot seat these past months, the pressure is on. The law aims to reduce overall health care costs, meaning the U.S. government has been slashing payment rates recently for Medicare Advantage in an effort to make fees more even with those through the Medicare fee-for-service program.

According to CRT Capital analyst Sheryl Skolnick, there is no putting off the inevitable.

"It is by no means a secret. Everyone knows it is coming and everyone knows it is going to be bad," he said.

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