For the second year in a row, the Obama Administration has reversed course on planned payment rate cuts for Medicare Advantage (MA), the private plans providing the Medicare benefit to nearly 30 percent of all Medicare beneficiaries. But this year’s reprieve doesn’t guarantee the program’s future viability.
In February, the Centers for Medicare and Medicaid Services (CMS) released its Advance Notice of estimates for the 2015 MA payment rate. The notice announced that MA payment rates were set to decrease on net by 1.9 percent next year.
However, America’s Health Insurance Plans (AHIP) commissioned the consulting group Oliver Wyman to study the combined impact of all the different policies that impact MA rates, finding a much greater total rate reduction of 5.9 percent in 2015. Obamacare’s payment cuts and new health insurer tax were included as components in the net reduction estimate. The analysis projected the impact on beneficiaries would be severe:
The combined impact of the 2015 changes may result in benefit reductions and premium increases of $35 to $75 per member per month and/or plan exits from local markets. Many beneficiaries could lose access to MA plans and their approach to care.
On Monday, CMS finalized the rate, but instead of reducing it, on net, the rate will be slightly increased (by 0.04 percent) in 2015. This is good news for the MA program and its beneficiaries.
But what happened between February and April to now have a payment increase as opposed to a decrease?
Political pressure to protect MA and its beneficiaries mounted. AHIP launched a multimedia “Seniors Are Watching” campaign, and there was strong and bipartisan opposition to the rate reduction—40 Senators signed a bipartisan letter to CMS that expressed support for MA and opposition to disruption of plans for seniors.
So what about the complicated formulas that dictate payment rates changed over this period?
As CMS’s final rate announcement fact sheet shows, Obamacare’s payment cuts are still happening (though to a slightly lesser degree), and the other formula that dictates the spending rate is actually decreased further than what CMS initially stated. However, the various formulas and policies regarding risk assessment and adjustment have been altered in a manner and to a degree where it all shakes out to the final small rate increase. For instance, one risk assessment policy that Oliver Wyman pegged as reducing payments by 2 percent has been dropped altogether.
Although CMS says there will be the small payment bump, some analysts still project MA to take a net rate reduction next year, although now it will be substantially less.
Much like last time, this will be a short-lived pardon for the MA program. And as Heritage warned last year when the very same drama played out, “[W]hile MA plans did survive the Obama Administration’s knife this time, it is still very much on the chopping block in coming years. Let’s hope there will be bipartisan support to stop those cuts, too.” But of course, next year won’t be an election year.