The Remington Report

A $634 billion reserve fund for health care included in President Obama’s fiscal year 2010 budget would be funded largely by slashing Medicare Advantage (MA) rates paid to health plans. A $634 billion reserve fund for health care included in President Obama’s fiscal year 2010 budget would be funded largely by slashing Medicare Advantage (MA) rates paid to health plans.

The proposal calls for a two-year phasedown – in 2011 and 2012 – of rates paid to MA carriers to reach 100% of traditional Medicare fee-for-service (FFS). For health plans, that would translate to an average $46.07 reduction per member per month in 2011 and $92.39 in 2012. The following year, MA carriers would participate in a competitive-bidding process. The strategy of reducing the benchmarks first, Gorman predicts, will lead to “some very competitive bidding” among carriers for 2013.

Under the competitive-bidding process, MA rates could wind up being less than 100% of Medicare FFS. The administration estimates that the proposed changes will translate to $175 billion in savings over the next 10 years.