Anticipated Cut in Medicare
Advantage Plan Payments Becomes Marginal Increase by CMS
Health insurance lobby had fought
hard to avoid the cut, wanted payments to remain the same
7, 2014 - The highly anticipated change for 2015 to the rate paid to
private Medicare Advantage Plans was announced today and it has to be
viewed as a win for the health insurance lobby. The proposed rate
reduction of 1.9 percent proposed in February by the Centers for
Medicare and Medicaid Services became a marginal increase of .04 percent
for next year.
The health insurance companies ran a multi-million
dollar campaign to stop the Obama Administration from making cuts in the
amount the private companies get for their private Medicare health
“The announcement sets a stable
path for Medicare Advantage and implements a number of policies that
ensure beneficiaries will continue to have access to a wide array of
high quality, high value, and low cost options while making certain that
plans are providing value to Medicare and taxpayers,” according to the
news release by CMS late today.
Since the Affordable Care Act was
passed in 2010, Medicare Advantage premiums have fallen by 10 percent
and enrollment has increased by 38 percent to an all-time high of more
than 15 million beneficiaries, CMS reports.
Today, nearly 30 percent of
Medicare beneficiaries are enrolled in a Medicare Advantage plan.
Furthermore, enrollees are benefiting from greater quality as over half
of enrollees are now in plans with 4 or more stars, a significant
increase from 37 percent of enrollees in such plans in 2013.
“The policies announced today will
provide improved benefits in Medicare Advantage and the Prescription
Drug Plans while keeping costs low for Medicare beneficiaries,” said
Jonathan Blum, CMS principal deputy administrator.
“We believe that plans will
continue their strong participation in the Medicare Advantage program in
2015 and beneficiaries will continue to have access to a wide array of
high quality and affordable Medicare health and drug plans.”
CMS also announced the rates for
the prescription drug program – Part D.
….Lower Out-of-Pocket Drug
Beneficiaries in the Part D
prescription drug coverage gap, or “donut hole,” will benefit from
greater savings on prescription drugs. As a result of the Affordable
Care Act, in 2015, enrollees who reach the donut hole will receive
coverage and discounts of 55 percent on covered brand name drugs and 35
percent on covered generic drugs, an increase from 52.5 percent and 28
percent, respectively, in 2014. The Affordable Care Act’s Coverage Gap
Discount Program has provided discounts to more than 7.9 million
Medicare beneficiaries, saving $9.9 billion on prescription drugs, or an
average of $1,265 per beneficiary.
Most of the rest of the
announcement was about the Medicare Advantage program.
….Payments to Medicare Advantage
>> CMS estimates that the overall net change to plan
payments between 2014 and 2015 to be +0.4 percent, compared to the
estimated overall net change to plan payments of -1.9 percent for the
proposals in the Advance Notice. Individual plan payments will vary by
plan based on, but not limited to, its location and star rating.
>> Before the Affordable Care Act, Medicare Advantage plans
were paid more than 10 percent compared to traditional Medicare, costing
the program more than $1,000 per person each year, while quality and
health outcomes were similar to those enrolled in traditional Medicare.
The changes underway reduce excessive payments to Medicare Advantage
plans, while incentivizing quality improvements by basing part of
Medicare Advantage payment on plan quality performance.
>> To provide for continued stability in the Medicare
Advantage program, CMS will implement a new phase-in schedule for the
Part C risk adjustment model introduced in 2014. In addition, to
improve payment accuracy, CMS has refined its risk adjustment
methodology to account for the impact of the influx of baby boomers. In
addition, for 2015, CMS will not finalize the proposal to exclude
diagnoses from enrollee risk assessments.
….Greater Protection for
Beneficiaries: CMS intends to again use its
authority, provided by the health care law, to protect Medicare
Advantage enrollees from significant increases in costs or cuts in
benefits, and, for the 2015 contract year, finalizing the permissible
amount of increase in total beneficiary cost to $32 per member per month
(down from $34 per member per month for the 2014 contract year). CMS
also continues to require plans to refine their offerings so that
beneficiaries can easily identify the differences between their
….Increased Protections for
Beneficiaries Affected by Changes in Medicare Advantage Plan Networks:
The final Call Letter strengthens tools used
to ensure compliance with established provider access requirements and
establishes best practices for Medicare Advantage Organizations to
follow when they make significant changes to their provider networks.
….Other policies that are not
being finalized as proposed include:
>> Delayed implementation of new Part D Risk Adjustment
>> Not implementing some proposed changes to the Star
>> Not implementing the proposal to require additional
coverage in the gap for generic and brand drugs in Enhanced Alternative
Below is the complete Fast Sheet
issued by CMS on the Medicare Advantage plan for 2015
in the 2015 Medicare Advantage and Part D Rate
Announcement and final Call Letter continue the
successful implementation of the Affordable Care Act’s
reforms that improve quality and provide greater
protections for beneficiaries and value for taxpayers.
Here are the facts:
intends to again use its authority, provided by the
health care law, to protect Medicare Advantage enrollees
from significant increases in costs or cuts in benefits,
and, for the 2015 contract year, finalizing the
permissible amount of increase in total beneficiary cost
to $32 per member per month (down from $34 per member
per month for the 2014 contract year). CMS will maintain
existing limits on beneficiaries’ maximum out-of-pocket
spending, but expand existing guidance by encouraging
Medicare Advantage organizations to allow enrollees’
dollar contributions towards these limits to be
transferable when they move to any plan, regardless of
plan type, offered by the same organization instead of
starting over in the new plan. CMS also continues to
require plans to refine their offerings so that
beneficiaries can easily identify the differences
between their options.
final Call letter also requires plans to provide to CMS
with 90 days notice of any significant changes to their
provider networks in order to ensure help compliance
with provider access requirements. The Call letter also
establishes best practices for Medicare Advantage
Organizations to follow when they make significant
changes to their provider networks. Furthermore, in
response to comments from beneficiary advocates and some
professional associations, CMS is establishing a policy
to allow enrollees to switch plans when they are
affected by significant mid-year provider network
terminations initiated by their Medicare Advantage
Organization without cause.
Medicare Advantage – Net
Payment Impacts Based on Final Estimates Released on
April 7, 2014
The Rate Announcement
and final Call Letter continue implementation of changes
under the Affordable Care Act to reduce overpayments and
improve quality, by phasing in alignment of Medicare
Advantage benchmarks with Medicare fee-for-service (FFS)
costs. Before the Affordable Care Act, Medicare
Advantage plans were paid more than 10 percent more
compared to traditional Medicare, costing the program
more than $1,000 per person each year, while quality and
health outcomes were similar to those enrolled in
traditional Medicare. The changes underway revise
payments to Medicare Advantage plans to be more
consistent with costs in traditional Medicare, while
incentivizing quality improvements by basing part of
Medicare Advantage payment on plan quality performance.
The Rate Announcement and final Call Letter also make
other non-Affordable Care Act changes to increase
payment accuracy such as updating the methodology to
calculate risk adjustment normalization factors.
Although payments will
vary by plan based on its location and star rating,
overall, CMS estimates the net change to plan payments
between 2014 and 2015 to be +0.4 percent. Last year,
plans instituted modest premium changes and overall
enrollment grew by greater than 5 percent.
CMS received over 1,300
comments on the Advance Notice and draft Call Letter
that was released on February 21, 2014. Based on those
comments, several changes were made for the Rate
Announcement and final Call Letter. Key changes
phase-in schedule for the new risk adjustment model that
began in CY2014. We will blend the risk scores
calculated using the 2013 CMS-HCC and 2014 CMS-HCC
models at 67 percent and 33 percent, respectively. We
are committed to the new model; however, for 2015, given
the number of changes in other payment factors, we
believe that providing a longer timeframe for full
implementation is appropriate. In addition, CMS will
not finalize the proposal to exclude diagnoses from
enrollee risk assessments. CMS will continue to analyze
the data on home risk assessments we began collecting
and may reconsider this proposal to exclude home-based
diagnoses for payment purposes in a future plan year.
implementation of new Part D Risk Adjustment Model,
continue using current model.
· Refined the
risk adjustment methodology to account for the impact of
baby boomers. We have calculated the normalization
factors for 2015 in order to better account for the
effect of baby boomer e
Year-to-Year Percentage Change in Payment
Advance Notice Impact
Calibration of the risk model to account for
demographic changes (Baby Boom Adjustment)
Other risk adjustment updates
The final Medicare Advantage capitation
rates and payment policies for 2015 were released on April
7, 2014. As done each year, Medicare Advantage plans will
submit bids in June and all Medicare Advantage plan options
for 2015 will be made available to the public as part of the
CMS annual landscape announcement, which is prior to the
2015 Medicare Open Enrollment set to begin on October 15,
Technical Factors Underlying Payment
As part of CMS’ Medicare Advantage and Part
D 2015 Rate Announcement and final Call Letter release, CMS
indicated the final estimate of the combined effect of the
Medicare Advantage growth percentage and the fee-for-service
(FFS) growth percentage was -3.4 percent (described further
below). This historically low growth in Medicare per-capita
spending is attributed, in part, to successful initiatives
undertaken to promote value over volume and help curb fraud,
waste, and abuse in the Medicare fee-for-service program in
recent years. It is important to note that this figure is
the combined effect of the Medicare Advantage growth
percentage and the fee-for-service growth percentage.
As required by the Affordable Care Act, CMS
established a new methodology for calculating each Medicare
Advantage county rate as a percentage of FFS spending in
each respective county. The Affordable Care Act provides
for a transitional period during which each county rate is
calculated as a blend of the pre-Affordable Care Act rate
set under the law (known as the “applicable amount”) and the
new FFS-based Affordable Care Act rate (known as the
“specified amount”). For 2015, most counties will be fully
transitioned to the new rate methodology, while others will
continue to be based on a blended rate. The Social Security
Act requires that the blended benchmark (which is increased
by quality bonus payment percentages where applicable) be
capped at the level of the applicable amount.
As outlined in the Rate Announcement, the
final estimate of the change in the national per capita
Medicare Advantage growth percentage for aged and disabled
enrollees combined in CY 2015 is -4.0 percent. The Rate
Announcement also includes the final estimate of the FFS
growth percentage. The Affordable Care Act requires that
the specified amount be calculated as a percentage of the
county FFS amounts. For 2015, the final estimate of the
change in the Aged/Disabled FFS United States per capita
cost (USPCC), which will be used for the county FFS portion
of the benchmark is -3.3 percent. The combined impact both
of these estimates is -3.4 percent.
Consistent with the 2014 Rate Announcement,
the basis for the final growth percentages reflects an
assumption that Congress will act to prevent the projected
reduction in Medicare physician payment rates from occurring
on April 1, 2015. The statute provides the Secretary with
the discretion to base the Medicare Advantage Growth
Percentage on a current law basis or to base the estimate on
what is likely to occur to the physician fee schedule based
on recent history. CMS is using this assumption based on
the grounds that it is a more reasonable expectation than
the reduction required under the statutory “sustainable
growth rate” (SGR) formula.
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