The federal government continues to make changes to the Medicare Advantage program, which allows private insurance companies to provide more than 10 million seniors with healthcare coverage. Recently, the Centers for Medicare and Medicaid Services (CMS) laid out new rules for private insurers that wish to bid for the right to offer Medicare Advantage (private comprehensive medical coverage) and Medicare Part D (prescription drug) plans. CMS has now also announced its intention to effectively cut payments to insurers by as much as 5%.

Medicare Advantage subscribers can enroll or change plans every year during an open enrollment period. It won't be known how the proposed payment reductions to insurers will affect consumers until June 1, when insurers submit their bids to the government to offer Medicare Advantage plans for next year. It is expected that plans may have to increase premiums by up to $40-70 per month to make up for the reduction in federal payments, unless the insurers elect to absorb some or all of the impact of the cuts themselves. Insurers might also reduce plan benefits or even stop offering certain plans entirely, particularly in rural areas where their per-subscriber operating costs are higher. CMS will have the ability to tweak the proposed payments to insurers, if necessary, after it sees what their bids are.

CMS's other recent rule changes included limiting the number of different plans that can be marketed by an insurer, to make it less confusing for seniors to compare the costs and benefits of different plans; preventing insurers from passing on the cost of brand-name prescription drugs to patients when they are also being charged higher copayments; and preventing plans from charging copayments to patients with chronic illnesses, such as nursing home and dialysis patients, that are much higher than copayments charged by the traditional government Medicare program.