Politics

REVEALED: Top Medicare Advantage insurer knew Obamacare would cause devastation for seniors

Patrick Howley Political Reporter

The nation’s largest Medicare Advantage insurer knew that Obamacare would lead to cuts in benefits and access to insurance for the nation’s seniors as early as April 2013, according to company earnings call transcripts reviewed by The Daily Caller.

UnitedHealth Group is already dropping thousands of doctors from Medicare Advantage plans in the hope that the doctors’ expensive patients will also leave their UnitedHealth plans. UnitedHealth’s CEO told his investors early last year that the Affordable Care Act would force the company to “reduce benefits and pull back access” for consumers.

Obamacare, which raids $300 billion from the privately run Medicare Advantage program, is squarely to blame. The cuts will begin affecting many seniors in 2014 and also mandates new Medicare Advantage rate reductions.

Medicare Advantage, which was created in 1997, is a network of PPOs and HMOs that offers oldsters the option of getting benefits through the network rather than through the original Medicare Parts A and B. Most studies indicate it significantly reduced out-of-pocket costs for seniors while providing better benefits, but the program was targeted for cuts under the Affordable Care Act.

“While we are performing well, we are doing so in a challenging economic, regulatory and health care climate. The headwinds we have discussed in our past sessions with you remain very real. By far the most impactful headwind is the Medicare Advantage rate picture for 2014,” UnitedHealth president and CEO Stephen J. Hemsley said on the company’s first quarter earnings call on April 18, 2013.

“While the final guidance was improved from the negative 8% all-in starting point, it is still a significant challenge. The cumulative net effect of the SGR resolution, the mandated ACA [Obamacare] rate reductions, the strong negative impact of the risk recalibrations and the insurance tax still leaves the Medicare Advantage program significantly under-funded, a more than 4% net reduction against a typical industry forward medical cost trend outlook of 3% or more for 2014.”

“These rates will undoubtedly impact the more than 14 million Medicare Advantage beneficiaries across the nation and will cause UnitedHealthcare to reduce benefits and pull back access in certain markets and will affect the growth prospects and earnings potential for our overall Medicare Advantage offerings across all our markets for 2014,” Hemsley said.

“We did not expect the fastest growing, most popular and most effective of the Medicare benefit options serving America’s seniors would be underfunded to this extent in 2014, particularly with the backdrop of the already existing ACA mandates and sequestration,” Hemsley said. “We will take the time to fairly assess the implications to our 2014 UnitedHealth Group growth outlook and whether our growth expectations for 2014 can be sustained in light of the continuation of both sequestration and a significantly greater rate setback than anyone could have expected.”

The situation kept getting worse, according to Hemsley’s comments in UnitedHealth Group’s third quarter earnings call on October 17, 2013.

“As expected, the third quarter operating margin of 8.6% decreased from last year, primarily due to government under-funding of the Medicare Advantage program and nearly 40 basis points of impact from lower reserve development. These were partially offset by strong margin expansion in health services at both UnitedHealthcare and Optum,” Hemsley said.

“Looking forward, we expect our 2014 earnings outlook to be impacted by overall Medicare Advantage funding levels as well as the effects of the non-deductible insurer fee on Medicare as we indicated in our last earnings call. The significant and continued level of under-funding cannot be fully offset in 2014 from the performance effects we expect from the balance of our health benefits markets,” Hemsley said later in the call.

UnitedHealth Group did not return a request for comment.

Obamacare’s Medicare Advantage cuts are causing growing concern on Capitol Hill. A Kaiser Family Foundation report cited in the background notes for a December 2 House Energy and Commerce Committee hearing stated that more than 526,000 seniors enrolled in the program will have to switch to another Medicare Advantage plan or go back to private insurance in 2014, while more than 105,000 seniors enrolled in Medicare Advantage plans in 2013 will not be able to do so in 2014.

“It’s already happening: one constituent told me they’re looking at an extra 100 miles of travel every week because the specialist in their county is dropped from their plan. Another has had their cancer specialist eliminated from their network,” Republican Rep. Brad Wenstrup said in a bipartisan December 6 letter to Centers for Medicare and Medicaid Services (CMS) administrator Marilyn Tavenner that was signed by all 16 members of the Ohio congressional delegation.

“We’re facing Medicare Advantage cuts that may impact upwards of 700,000 Ohio seniors. That means our parents and grandparents, our greatest generation, could have to pay more for less choice when it comes to their health care,” Wenstrup wrote. “This just doesn’t measure up to the soaring rhetoric President Obama used to get Obamacare passed.”

Follow Patrick on Twitter