Many people (myself included) have predicted the demise of Medicare Advantage.  The Health Care Reform law created a number of new rules for insurance companies that run these plans and profit from the billions of dollars they receive from the Medicare Trust Fund.

Starting in 2011, every Medicare Advantage plan must cap enrollees’ out-of-pocket expenses. This means a person treated for cancer won’t run up bills that can total $10,000 or more.

Beginning in 2014, profit margins for Medicare Advantage plans will be capped as they will be required to spend 85% of their revenue on their enrollees.  Most Advantage plans already meet this requirement, but some plans have spent as little as 70% of revenue on their enrollees.

If you think these tough rules (and increased oversight) signal the end of Medicare Advantage, you would be wrong.  In both Tucson and Phoenix new Medicare Advantage plans are coming to these markets.

SCAN (Senior Care Action Network) has nearly 8,000 enrollees in Maricopa county after just two years there.  SCAN will begin marketing its plan in Tucson later this year.

Caremore was new to the Tucson market in 2010 and will be expanding to Phoenix for 2011. Both SCAN and Caremore are $0 premium Medicare Advantage plans which include Part D.

With millions of baby boomers turning 65 each year, insurance companies have determined that the growing Medicare market is good for their bottom line.

The Associated Press, reporting on Humana’s strong business performance in 2010, said “its lucrative Medicare Advantage business posted double-digit enrollment growth”.

Reuters reported that UnitedHealth Group posted a higher-than-expected second-quarter profit, “helped by growth in its Medicare Advantage plans for elderly and low-income Americans”.

Reuters reported that WellPoint (which owns many Blue Cross Blue Shield companies across the country) “wants to expand its Medicare business to take advantage of the post-war baby boom generation”.

Humana’s CEO recently told industry analysts that Medicare Advantage remains a “tremendous opportunity” and acknowledged that he’s been surprised that more competitors haven’t ventured into the market.

It looks like there will be more competitors getting into the Medicare Advantage market and that means more options for seniors in Tucson and Phoenix.

Predictions that Medicare Advantage will disappear seem to be very wrong. I am one who predicted that companies would be getting out of the Medicare Advantage business due to cuts in funding and limits on profits that have been imposed by Democrats.   Here is an article I found on FoxBusiness.com that debunks my theory.

NEW YORK (Reuters) – WellPoint Inc wants to expand its Medicare business to take advantage of the post-war baby boom generation becoming eligible for the U.S. government-sponsored health program, the health insurer’s chief financial officer said on Wednesday.

WellPoint can “absolutely” compete with the two biggest Medicare players — UnitedHealth Group Inc and Humana Inc — and will take market share over the next three to five years, WellPoint CFO Wayne DeVeydt said in an interview.

“It’s a space that we will want to play in and we will want to expand in,” DeVeydt said. “You will definitely see us take a more prominent role prospectively in the Medicare sector.”

Some investors have been bearish on Medicare Advantage — the growing part of the program run by private companies — because under the new healthcare reform law, Medicare payments to insurers will be frozen next year and be reduced beginning in 2012.

But DeVeydt called Medicare a “huge growth opportunity for us.” WellPoint, the largest U.S. health insurer by membership, operates in 14 core states, and in those states, the company anticipates about 40 percent of its existing membership will become eligible for Medicare in the next few years.

“Even with potential margin contraction … it is a space where the population is going,” DeVeydt said, speaking after the company posted second-quarter results on Wednesday.

WellPoint has about 350,000 Medicare Advantage members, which substantially trails UnitedHealth and Humana.

But DeVeydt said WellPoint’s business providing supplemental Medicare plans — for which it has about 850,000 members, placing it second behind UnitedHealth — puts it in a good position, as do its extensive physician networks in its core states.

“We know we that we offer products that seniors want,” DeVeydt said. “We think we can compete extremely well … and with the size of the population aging in, we believe we’ll be a net taker over the next, say, three to five years.”

Asked if WellPoint could compete on a national scale with UnitedHealth and Humana, DeVeydt said: “Absolutely.”

DeVeydt said the company would seek Medicare growth both organically and through deals. Speaking about the merger climate generally, DeVeydt said while there is a lot of discussion, too much uncertainty still exists about the fallout from the new healthcare reform law.

NOTE: Wellpoint is a minor player in the Arizona Medicare Advantage market.  Unicare is a Wellpoint company offering private-fee-for-service Medicare Advantage plans in Arizona. These types of Medicare Advantage plans are supposed to be canceled in 2011 unless the company creates a provider network.