Is there a future for Medicare Advantage under Obamacare?by Denise Early on Aug. 20, 2012, under Health
The Affordable Care Act cuts payments to Medicare Advantage plans, which may cause some companies to get out of the business. Mitt Romney says 4 million seniors will lose their Advantage plans due to these cuts. I keep saying that insurance companies seem to know something the rest of us don’t – and so they keep investing in Medicare Advantage.
The latest example is Aetna offering to pay $7.3 billion for Coventry Health Care Inc. (NYSE:CVH).
LifeHealth Pro, an insurance industry publication reported today:
Aetna, Hartford, is starting with 18 million enrollees, 437,000 Medicare Advantage enrollees, 1.2 million Medicaid enrollees, and $36 billion in projected 2012 revenue.
Coventry, Bethesda, Md., has 4 million enrollees, 253,000 Medicare Advantage enrollees, 932,000 Medicaid enrollees, and $14 billion in projected 2012 revenue.
Aetna likes Coventry’s emphasis on efficient, low-cost plans with relatively narrow provider networks, Aetna says.
Earlier this year, Cigna completed its purchase of Healthspring for $3.8 billion.
In January 2012, the Philadelphia Business Journal reported:
Cigna has completed its previously announced $4 billion acquisition of HealthSpring, a move that expands its presence in the Medicare managed-care market.
The acquisition adds more than a million individuals to Cigna’s existing 70 million members.
HealthSpring of Nashville, Tenn., has 340,000 Medicare Advantage members in 11 states — including Pennsylvania and New Jersey — and Washington, D.C., as well as a large, national stand-alone Medicare prescription drug business with more than 800,000 customers.
In 2010, HealthSpring paid $545 million to buy Baltimore-based Bravo Health, the Philadelphia market leader in providing managed-care plans for residents dually eligible for Medicare and Medicaid.
So insurance companies keep investing billions of dollars to expand their Medicare Advantage business – while Mitt Romney says Obamacare is killing this option for seniors. As I see it, smaller Advantage plan companies will find it difficult to find enough efficiencies to handle lower payments from Medicare. But the big players will get bigger, and they know they can still make profits with less money from Medicare.
Insurance companies like UnitedHealthcare, Cigna, Wellpoint, and Aetna seem to know that Medicare Advantage enrollment will continue to grow year by year (it’s almost 30% of all Medicare beneficiaries now). And they figure they can make profits from the billions of dollars in revenue they can get from Medicare.
FYI: In many urban areas like Phoenix and Tucson, AZ, almost 50% of Medicare beneficiaries are enrolled in Medicare Advantage. Other cities with high Medicare Advantage enrollment are: Philadelphia, Pittsburgh, Buffalo, Miami, Los Angeles.