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Medicare & Medicaid News

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

April 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 plans.

“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.

 

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Decoding the High-Stakes Debate Over Medicare Advantage Cuts

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April 7, 2014


 
 

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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 Spending:

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 Plans:

    >> 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 options. 

….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 Model.

    >> Not implementing some proposed changes to the Star Ratings.

    >> Not implementing the proposal to require additional coverage in the gap for generic and brand drugs in Enhanced Alternative plans.

Below is the complete Fast Sheet issued by CMS on the Medicare Advantage plan for 2015

Fact sheet Issued Today: Strengthening Medicare Advantage

Strengthening Medicare Advantage

Updated April 7, 2014

The policies 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:

 

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 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.

The 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 include:

 

·         Modified 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.

·         Delayed 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

 

 

 

Impact

Advance Notice Impact

Final Announcement

Impact

Growth rate

-1.9%

-3.4%

Benchmark updates

-5.0%

-4.4%

Calibration of the risk model to account for demographic changes (Baby Boom Adjustment)

+3.2%

 

+4.3%

Other risk adjustment updates

+1.8%

+3.9%

Total

-1.9%

+0.4%

 

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, 2014.

 

Technical Factors Underlying Payment Changes

 

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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