Medicare Advantage insurance plans that meet the program’s higher quality standards should be in a strong position to withstand federal payment reductions proposed for 2014, a senior U.S. health official said on Thursday.

Jonathan Blum, acting principal deputy administrator for the Centers for Medicare and Medicaid Services (CMS), told the Senate Finance Committee that insurance plans with four-star and five-star Medicare quality ratings have seen enrollment more than double in recent years, despite a huge drop in federal payments.

Medicare’s rating system ties federal payments to Medicare Advantage insurers to a series of quality performance standards and includes bonuses for plans with top rankings.

“Those plans who are below four-star are facing, given what we’ve proposed, the greatest payment challenge. But I believe that plans that have made the transformation to provide four- star/five-star care will have a strong business model,” Blum said in testimony before the panel.

CMS, a federal agency within the Department of Health and Human Services, has proposed a 2014 payment reduction of 2.3 percent for insurers in Medicare Advantage, a program that allows about 14 million elderly and disabled people to receive their Medicare coverage through private health plans.

But the proposal, due to be finalized on April 1, has come under intensive fire from the insurance industry, which warns the change would cost insurers $11 billion and could lead to higher costs for beneficiaries.

America’s Health Insurance Plans, a leading trade group, issued an infographic on Thursday that suggested lower Medicare Advantage payments combined with other changes under President Barack Obama’s healthcare reform law could increase average premiums or reduce benefits by $50 to $90 a month.

Separately, three Republican lawmakers led by Senator Orrin Hatch charged in a letter to CMS that cumulative changes to Medicare Advantage would cut more than $300 billion from the program and jeopardize its growth. The sum is part of the $716 billion in lower Medicare payment increases achieved through the healthcare law, which Republicans characterized as payment cuts during the 2012 presidential campaign.

But some Democrats offered a different reaction to the CMS payment proposal for 2014.

“The insurance companies are screaming bloody murder. But shouldn’t they have known?” asked Senator Bill Nelson, a Florida Democrat, who said the Patient Protection and Affordable Care Act has long aimed to reduce payments to insurers.

When Medicare Advantage was created in 2003, Congress included incentive payments to ensure plan participation. On average, Medicare paid private plans 114 percent more than the cost of traditional fee-for-service Medicare before healthcare reform became law in 2010.

Blum said the reform law has reduced that payment rate to 104 percent of traditional Medicare for 2013.

Insurers say Medicare Advantage plans offer more benefits such as prevention programs or reimbursement of gym memberships that traditional Medicare plans do not.

Medicare currently offers bonus payments to private plans that maintain higher quality ratings and Blum told lawmakers that 37 percent of Medicare Advantage beneficiaries are now enrolled in four- and five-star plans, up from 16 percent in recent years. CMS says beneficiary premiums have fallen 10 percent since the reform law’s enactment.

“Our goal is that every Medicare beneficiary who chooses the (Medicare Advantage) program has an opportunity and seeks out a four- or five-star plan,” he said.

“Some plans haven’t yet made the transformation to four star, five star,” Blum added. “We want to help those plans.”

(Reuters)