The recent boost to Medicare

This was an under-reported story which I missed at first.  Sarah Kliff reports:

…the Obama administration reversed a proposed 2.3 percent pay cut for private Medicare plans, replacing it with a 3.3 percent raise.

For health plans, this was a huge victory. As Citi analyst Carl McDonald put it in a Tuesday note to investors, this was “Armageddon averted.”

“The rate adjustment,” McDonald continues, “sends a pretty clear message that CMS has no interest in seeing major disruption in the Medicare Advantage program right now, quieting concerns about a post election desire to rein in enrollment and margins.”

Medicare Advantage plans will still get a tiny haircut due to other changes the federal government proposed. The 2.3 percent pay cut that became a 3.3 percent raise was one among a few cuts that the Obama administration had proposed for 2014.

Cuts to Medicare Advantage plans mandated in the Affordable Care Act, for example, will still go forward.

Overall though, the cuts are way smaller than what the Obama administration initially proposed. McDonald at Citi estimates that Medicare Advantage plans will see a 2 percent rate reduction, compared to 7 percent to 8 percent that analysts predicted with the initial rates.

Here is more.  This is but a single data point, but I take it as further evidence that fiscal consolidation cannot easily be done on a dime.  In fact it cannot easily be done at all, especially in the United States.  Here is my earlier post “Why are budget issues urgent now?”.  You will note that Medicare Advantage is a program considered especially irksome, and especially costly, by many commentators on the left.


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