Can we trust the Wall Street Journal to report this properly? If so, Ezra Klein’s quote of Janet Adamy’s and Avery Johnson’s reporting adds some important detail:
In June, federal officials received 2,100 bids from private insurers hoping to offer Medicare Advantage plans next year. Officials said Tuesday they denied rate increases and benefit cuts in 298 cases. As a result, they said, Medicare Advantage premiums will be 1% lower on average in 2011. The plans, on average, carry higher co-payments and deductibles. Taking those into account, the core benefit package will cost seniors an extra $13 per month, the government said, at a time when many Americans are facing double-digit rises in their health-insurance costs.
I’ve always known that there is some opaque process by which MA proposals are accepted or denied. It’s probably pretty easy to put teeth into that process, to ask more questions about assumptions, to make it more rigorous, and thus deny a larger proportion of bids.
Further on in the WSJ article, Adamy and Johnson write,
[I]n some cases, the insurers were forced to run their plans at a loss. While it was generally too late for them to withdraw from Medicare Advantage for 2011—only a handful did—more might drop out for 2012 and force their customers to look for another plan.
This is what I would expect from a heightened level of bid scrutiny: fewer plans will participate. Maybe plans lost this round, but it is not a one-shot game. Those that participate may have lower premiums (and higher cost sharing) than they otherwise would, but some will just opt out.
Going back to my prior post, this reflects the other element of negotiating. You have to be prepared to walk away. The government can’t. But plans can, and will.
(Insert usual plea for competitive bidding in Medicare.)
