Traditional Medicare as seniors know it could be radically altered depending on this year's election cycle.
One proposal in a "Project 2025" plan developed by allies of former President Donald Trump is to make a private-sector alternative to Medicare the default option when older Americans enroll in the federal health insurance program.
The Project 2025 document developed by conservative think tank Heritage Foundation also includes a rollback of regulations governing this private-sector alternative, known as Medicare Advantage (MA).
Just over half of Medicare-eligible seniors are already enrolled in MA plans.
If ever adopted, these ideas in Project 2025 could limit the choices seniors have for health care services. But insurers may benefit if certain regulations enacted by the Biden administration are undone.
One supporter of the current Medicare Advantage regulations, Center for Medicare Advocacy associate director David Lipschutz, said insurers “would likely embrace an effort to roll back some of the rules that apply to them.”
"From a consumer advocate standpoint, we would correspondingly prefer more regulation and more accountability from plans."
'Bring our movement together'
It’s not yet clear what chance these suggestions — or anything else in the sprawling 922-page Project 2025 — have if Trump were to win the 2024 election.
Republican presidential nominee Donald Trump recently distanced himself from the plan, and on Thursday at the Republican National Convention he also pledged to "protect Social Security and Medicare" without offering details.
A discussion of Medicare Advantage was also nowhere to be found in the GOP’s 16-page party platform.
However, the Project 2025 effort is run by close allies of the former president who could have prominent roles in a second Trump administration.
Roger Severino, who wrote the section that includes the Medicare reforms, served as the director of the Department of Health and Human Services' Office of Civil Rights from 2017 to 2021 under the Trump administration.
Trump’s vice presidential pick, JD Vance, also recently said Project 2025 contained "some good ideas."
Last Monday, Heritage also led a six-and-a-half-hour "Policy Fest" at the RNC, with Project 2025 executive director Paul Dans saying the goal of the plan was to "bring our movement together."
'Supercharge the privatization'
What worries Lipschutz about Project 2025 is it will "supercharge the privatization" of government-run health coverage by making Medicare Advantage the default option at enrollment.
Right now, traditional Medicare is the default option.
The popularity of Medicare Advantage plans has grown over the last decade because they offer other benefits — such as dental and vision care and low or no premiums — that traditional Medicare does not.
But there are trade-offs.
Seniors with MA plans can only go to the plan's network of healthcare providers — which can change from year to year — whereas those on traditional Medicare can see any practitioner or hospital system that accepts the coverage, which is nearly all providers.
MA insurers have also come under scrutiny in the last two years for delaying or denying authorizations for patient procedures or care, according to some providers, as well as not paying for medical services patients received without prior approval.
The practices have forced more than a dozen healthcare providers across the country to dump their contracts with several MA insurers in the last two years, leaving seniors enrolled in those plans with a smaller pool of doctor and hospital choices.
As a result, defaulting seniors into Medicare Advantage would "kind of fly in the face of the existing Medicare statute, which makes a point of emphasizing the free choice of provider for beneficiaries," Lipschutz said.
'Historic level of regulations'
MA insurers, however, may welcome the changes offered in Project 2025.
Not only would default MA enrollment increase the number of people on their plans, but the proposal includes "[removing] burdensome policies that micromanage MA plans" and "[reconfiguring] the current risk adjustment model," among others.
Overall, the Biden administration has "not been very friendly to the industry," Whit Mayo, an analyst with Leerink Partners, previously told Yahoo Finance, with a nearly "historic level of regulations," many of them aimed at addressing issues with MA plans.
For instance, the Centers for Medicare and Medicaid Services established new rules on how much insurers can compensate a broker selling MA plans to make sure seniors are steered into coverage that best meets their needs.
The agency also changed how MA plans will be rated and finalized rules around health equity, behavioral healthcare services, and supplemental benefits that would require more action from insurers.
Finally, the agency introduced a new patient risk coding model that will likely reduce how much money the government pays to insurers for each patient.
All these regulations cut into MA insurers' bottom lines, forcing some this year to lower their forward-looking guidance. A rollback of some or all of these regulations could have the opposite effect on their profits.
But what would be the trade-off?
"In my mind, it very likely means less overall oversight and enforcement efforts over plans," Lipschutz said, "and subsequent consequences for breaking the rules."
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Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on Twitter @JannaHerron.
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