Seniors Are Paying For Medicare Budget Cuts
WHEELING-Many senior citizens are now paying out of their own pockets for a 2 percent cut in federal Medicare reimbursements to doctors, hospitals and health insurance companies.
Beginning Jan. 1, seniors enrolled in certain Medicare Advantage Plans – including some zero premium plans- started paying an additional $16 or $17 monthly to absorb a 10-year, 2 percent cut mandated by the Budget Control Act of 2011. This was extended by two years in December when Congress passed a replacement measure.
The Congressional Budget office estimates the total reduction in Medicare spending with the 2 percent cut will be about $100 billion over the 10-year period.
The increase to seniors offsets a 1.5 percent Social Security cost of living allowance of $19 per month in 2014.
Most Medicare recipients pay $104.90 per month for their Part B premium as their contribution toward the $800 Centers for Medicare and Medicaid Services average monthly payment to health care providers and insurers.
While the bipartisan budget deal passed last month touted no taxes or cuts to Medicare beneficiaries, it does not protect seniors from out-of-pocket increases imposed by some health insurance companies to offset the 2 percent reimbursement cut.
Centers for Medicare and Medicaid spokesman Raymond Thorn declined to comment on the additional out-of-pocket expenses.
Some insurers are passing the 2 percent reduction on to customers, while other are reducing their reimbursement to doctors and hospitals. The Health Plan of The Upper Ohio Valley is passing its 2 percent reduction to customers.
“On average, the government pays us $800 per month for everybody enrolled in our Medicare Advantage product,” said Dave Mathieu, vice president of marketing for the Health Plan of Upper Ohio Valley. “Due to the budget cuts, CMS will pay all insurers 2 percent less in 2014.”
Mathieu said The Health Plan does not have sliding scale payment language in its contracts with doctors and hospitals providing for reduced payments if the federal government pays them less.
“Local hospitals will not see a 2 percent reduction in fees if they are treating a Health Plan Medicare customer,” he said. “We have always tried to have an optional Medicare Advantage plan with a zero premium; however, due to these changes in government payments to us in 2014, we are forced to charge a nominal premium.”
Mathieu said the company developed its no premium, Option One plan seven years ago to accommodate customers who may have drug coverage through the U. S. Veterans’ Administration.
“Over half of our members in that program have VA benefits for prescription drugs,” he said. “The other half consists of people who feel they cannot afford the current $94 plan that includes prescription drug coverage, or they are folks who are not taking very expensive drugs typically available for $4 at many local pharmacies.”
Approximately 650 local residents are enrolled in the Option One plan, while more than 13,000 are signed up for the plan that includes prescription drug coverage, he said.
The Health Plan, Highmark Blue Cross Blue Shield and Humana are the three major health insurance companies in the Upper Ohio Valley. Highmark spokesman Tim Lightner said the company will not assess its members for the drop in revenue.
“There is no dispute that there has been a 2 percent reduction in government payments to Medicare providers and Medicare health plans,” he said. “Health plans can choose to absorb the cuts, to pass the cuts along to their members in the form of higher premiums or higher co-pays, or reduce payments to the doctors and hospitals. We absorbed the cuts in 2013 and we will be reducing payments by 2 percent to doctors and hospitals in 2014, without financially impacting our members.”
He said Highmark has more than 10,000 subscribers in West Virginia’s 55 counties.
Lisa Simon, senior vice president and chief financial officer at Ohio Valley Medical Center in Wheeling, said the cuts translate to an annual loss of $2 million for the hospital.
“The three managed health care providers and direct payments from Medicare and Medicaid represent 65 percent of our billing,” she said. “On average, they pay us approximately 33 cents on the dollar for services rendered. Private insurance companies typically pay about 40 cents on billed charges.”
She said 6 percent of the hospital’s billing is in the form of uncompensated care for self-pay or charity patients.
OVMC President and CEO Michael Caruso said the hospital will not pass the Medicare reimbursement cuts on to patients.
“We will continue to manage our total expenses and improve process efficiencies to continue to provide and improve the quality of the health care services in our communities,” he said. “We will also utilize aggressive marketing to attract a greater market share of patients.”
Wheeling Hospital CEO Ron Violi said the Medicare change will not impact patient care at his hospital.
“No one is happy with this. It certainly will be a significant financial burden to us. However, no matter what happens, our first and foremost goal is maintaining our high level of patient care,” he said. “Patients are our top priority.
Over the years, they and their families have come to rely on us for a higher level of care not found anywhere else in the region. Their trust in us will remain justified.”
Officials with Humana could not be reached for comment.