Press release
“CMS is fighting to keep high-quality care options affordable and accessible for the millions of beneficiaries who rely on Medicare Advantage and Part D prescription drug plans,” said CMS Administrator Dr. Mehmet Oz. “By slashing handouts to big insurance companies, CMS is keeping premiums stable while ensuring that 97% of Medicare beneficiaries have access to 10 or more MA plans and that 93% of non-low-income beneficiaries can get an enhanced Part D plan for less than $6 a month.”
Less than $6.00 per month? Yup, with a deductible at or near the maximum and significant copayments.
“Slashing handouts to big insurance companies”
This refers to reducing or restraining payments that the federal government makes to private insurers that operate Medicare Advantage plans.
Medicare Advantage is not traditional Medicare. You enroll with a private insurer—such as UnitedHealthcare, Humana, Aetna, etc.—and CMS pays the insurer for your Medicare coverage.
So the phrase “handouts” is an opinionated characterization of those payments. The payments themselves are a fundamental part of how Medicare Advantage operates; CMS does not simply give insurers money without obligations.
Those payments by CMS are in lieu of making payment for health under traditional Medicare. THEY ARE NOT HANDOUTS. That is typical Trump administration fake propaganda.
Because MA plans operate on profit margins tied to CMS benchmarks and risk scores, payment cuts generally lead to several key consequences:
1. Reduced Supplemental Benefits & Higher Enrollee Costs
Insurers rely on federal rebates (the difference between their bid and the CMS benchmark) to fund extra benefits that Traditional Medicare doesn’t cover. When CMS reduces funding, insurers often offset the loss by:
- Cutting Perks: Reducing or eliminating vision, dental, hearing, OTC allowance cards, or transportation stipends.AHIP
- Increasing Cost-Sharing: Raising copays, deductibles, or maximum out-of-pocket limits for enrollees.AHIP
- Raising Monthly Premiums: Shifting baseline costs directly onto policyholders.
2. Market Exits & Reduced Coverage Options
If payment rates in specific regions fall below a plan’s threshold for profitability, insurers adjust their geographic footprint:
- Plan Withdrawals: Insurers may exit less profitable counties or drop specific plan tiers, forcing enrollees to choose new coverage during open enrollment.
- Consolidation: Smaller or regional MA plans may close or be acquired by larger insurers that have the scale to absorb lower margins.
3. Tighter Provider Networks & Downward Payment Pressure
Insurers absorb margin pressure by attempting to limit spending on healthcare delivery:
- Narrowed Networks: Insurers may drop expensive hospital systems, specialist groups, or regional centers from their networks.
- Lower Provider Reimbursements: Contracted doctors, medical groups, and hospitals may face reduced reimbursement rates or tougher rate negotiations from insurers.Breazeale, Sachse & Wilson, LLP
- Stricter Utilization Management: Increased use of prior authorization and strict medical necessity criteria to limit expensive procedures, inpatient stays, or brand-name drug coverage.
There is an ongoing policy debate over whether Medicare Advantage insurers are paid too much, too little, or appropriately. For example, MedPAC and some members of Congress have argued that Medicare Advantage costs taxpayers more than traditional Medicare, while insurers and their supporters dispute aspects of those analyses.
“Keeping premiums stable” by lowering payments to the insurer seems more an oxymoron than reality. Whose premiums?
