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Sequestration No Reason to Halt Health Reform’s Medicare Advantage Changes

I explained earlier today that the Medicare Advantage payment rates that the Administration announced Friday didn’t include any cuts beyond those required by current law, despite misleading claims to the contrary from AHIP, the health insurance industry’s trade association.  A related AHIP argument against the new rates — that they’re unfair coming on top of the cuts imposed by sequestration — is equally unconvincing.

Sequestration, which first took effect last year, includes a 2 percent cut in Medicare reimbursements to health care providers and plans, as well as other cuts to discretionary funding and some other mandatory programs.  The Medicare sequestration cuts, however, are not specifically targeted at Medicare Advantage.  And it’s hard to see why policymakers should effectively shield Medicare Advantage by stopping other scheduled payment cuts, while the sequestration cuts that affect hospitals, physicians. and other Medicare providers (as well as other mandatory programs) should remain in place.

In addition, the sequestration cuts scheduled for 2015 are calculated separately from the underlying Medicare Advantage payment rates and thus aren’t part of the 2015 preliminary rates announced on Friday, which are the primary focus of AHIP’s criticism.