Medicare Advantage Plans Win Major Concession from
Payments to insurers was forecast in February to be
cut for 2014, but it goes up in revision released Monday
April 2, 2013 – The final rate announcement for
Medicare was to be announced yesterday but was a little delayed as the
Centers for Medicare & Medicaid carefully worded the news release
revealing a 3.3 percent increase for insurance companies offering
Medicare Advantage plans, rather than the 2.2 percent reduction forecast
in a February announcement.
Kaiser Health News reported, “The insurance
industry won a major lobbying victory Monday after the Obama
administration backtracked on an earlier plan to cut Medicare Advantage
payments to insurers by 2.2 percent in 2014 and instead decided to give
them a 3.3 percent increase.”
“Health insurers stand to get significantly more
money for running Medicare Advantage plans next year than they had
The Wall Street
“The final announcement appeared to significantly
improve on a mid-February proposal that featured unexpectedly sharp cuts
and prompted a busy lobbying effort from health insurers.
“Companies that sell the plans, such as Humana
Inc., warned that cutting funding too much would hurt benefits for
seniors while driving plans out of some markets. The warnings and the
lobbying push drew substantial support in Congress, where at least 160
lawmakers signed letters to regulators urging industry-friendly
CMS issued the 2014 rate announcement and final
call letter for Medicare Advantage (MA) and prescription drug benefit
(Part D) programs yesterday and declared it sets ‘a stable path for
Medicare Advantage” and implements a number of policies designed to
improve payment accuracy.
Highlights for 2014
● For the first
time since inception of the Part D program, the deductible for
the defined standard plan will be lower.
● Since enactment
of the Affordable Care Act in 2010, Medicare Advantage
enrollment is up by 25 percent while premiums have fallen.
limit for the defined standard prescription drug (Part D) plan,
will be lower.
● Due to
Affordable Care Act, enrollees in the donut hole will receive
expanded coverage and discounts of 52.5 percent on covered brand
name drugs and coverage of 28 percent on covered generic drugs.
● The number of
four and five star Medicare Advantage plans has increased
The press release said:
“Health care spending has been slowing across the
nation, with Medicare spending per beneficiary growing at only 0.4
percent per capita in 2012.
For the first time since inception of the
Part D program, the deductible for the defined standard plan will be
lower in 2014 than in previous years. Today’s guidance will give people
in Medicare health and drug plans more value in the care they receive
and greater protections against increasing costs.
“Since enactment of the Affordable Care Act in
2010, Medicare Advantage enrollment is up by 25 percent while premiums
have fallen. Medicare Advantage will remain a strong option for
beneficiaries under the policies announced today.”
Jonathan Blum, CMS acting principal deputy
administrator, was quoted as saying, “The policies announced today
further the agency’s goal of improving payment accuracy in all our
programs, while at the same time ensuring program stability and
preserving beneficiary choice.”
CMS acknowledged the changes and said in the
release, “After careful consideration of public comments, key changes
and updates finalized in the Rate “Announcement and final Call Letter
● Lower Out-of-Pocket Drug Spending:
As detailed in the table below, deductible and
out-of-pocket limit for the defined standard prescription drug (Part D)
plan, will be lower in 2014, compared to 2013. Beneficiary costs will be
further reduced as coverage for Medicare enrollees who have reached the
prescription drug coverage gap, or “donut hole” continues to expand in
2014. As a result of the Affordable Care Act, in 2014, enrollees in the
donut hole will receive coverage and discounts of 52.5 percent on
covered brand name drugs and coverage of 28 percent on covered generic
drugs. To date, 6.3 million beneficiaries have received savings of $6.1
billion on prescription drugs.
● Greater Protection for Beneficiaries:
▪ As authorized
by the Affordable Care Act, to protect enrollees in Medicare Advantage
plans from significant increases in costs or cuts in benefits from one
year to the next, the amount of any permissible increase to total
beneficiary costs is limited to $34 per member per month for 2014 (down
from $36 per member per month in previous years).
▪ To avoid
unnecessary and unwanted prescriptions being delivered and charged to
Medicare enrollees because of “auto-ship” services, Part D plans will
require their network pharmacies to obtain enrollee consent prior to
each delivery, unless the enrollee personally requests the refill. CMS
strongly encourages Part D plans to implement this consent requirement
for the remainder of this year.
● Payments to Plans
▪ The final
estimate of the combined effect of the Medicare Advantage growth
percentage and the fee-for-service growth percentage is 3.3 percent.
These growth rates assume a zero percent change for the 2014 physician
fee schedule (PFS) by taking into account the likely Congressional
override of the schedule physician payment reduction.
▪ CMS will
continue implementation of payment based on quality in Medicare
Advantage. Over the last year, the number of four and five star plans
has increased significantly, with 127 such plans in Medicare Advantage
in 2013, 21 more than the prior year.
▪ Other changes
that are being finalized as proposed will continue the phased-in
alignment of MA benchmarks with Medicare fee-for-service (FFS) costs,
and adjust for diagnostic coding differences between Medicare Advantage
plans and Medicare fee-for-service providers.
● Improved Risk Adjustment Model: CMS will
implement the proposed updated and clinically revised risk adjustment
model which also limits opportunities for Medicare Advantage plans to be
paid more for better coding improvements. As a transitional step, the
risk scores for 2014 will be a blend of those calculated under the 2014
and 2013 models.
● Improved Coordination of Care: In coordination
with the Million Hearts initiative, plans are encouraged to improve
access and adherence to anti-hypertensive medications by expanding their
target enrollee populations for medication therapy management (MTM).
Individuals who receive MTM may experience better blood pressure
control, increased adherence to these vital medications, and better
self-management of their medications and health condition.”
The 2014 statutory updates to the annual parameters
for the defined standard Part D prescription drug benefit are finalized
Part D Benefit Parameters
Defined Standard Benefit
Initial Coverage Limit
Minimum Cost-sharing for Generic/Preferred Multi-Source
Drugs in the Catastrophic Phase
Minimum Cost-sharing for Other Drugs in the Catastrophic
Retiree Drug Subsidy (RDS)
Cost Threshold (Amount RDS sponsor must spend before
claiming the RDS subsidy)
Cost Limit (Amount after which RDS sponsor claims no RDS
(Note: The changes from 2013 to 2014 are
rounded to the closest appropriate level.)
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