CMS Proposes Reductions to Medicare Advantage Payments

The Obama administration on Friday proposed reductions to payments for Medicare Advantage plans in 2015, the New York Times reports (Pear, New York Times, 2/21).

The proposed cuts were detailed in a 148-page assessment of cost factors for MA plans for 2015, which noted multiple variables moving in different directions (Alonso-Zaldivar, AP/Sacramento Bee, 2/22). Specifically, CMS said the cuts were ameliorated by a projected 3.55% drop in the Medicare Advantage growth rate factor and a 1.65% decline in per-capita expenditures for Medicare's fee-for-service program (Modern Healthcare, 2/22).

Avalere Health analyst Matthew Eyles estimated the variables would translate to a 1.9% cut to MA plan payments. According to the AP/Bee, the proposed cuts affect basic rates for Medicare Advantage plans, but consumers will see variance in how those rates are assimilated into their individual plans depending on plan quality and location (AP/Sacramento Bee, 2/22). The cuts are less than half what insurers were expecting from CMS, according to Modern Healthcare (Modern Healthcare, 2/22).

MA plan payments are based on a "complicated formula" that factors in how much it costs to care for beneficiaries, and health care spending growth has been slower in recent years, according to the Times (New York Times, 2/21). Further, the cuts -- which are authorized under the Affordable Care Act -- bring MA plan costs more in line with traditional Medicare coverage. Before the ACA, MA plans cost the federal government on average 9% more than traditional Medicare.

Meanwhile, the assessment also included a proposed a 5% bonus for plans with quality rankings of four stars or above.

Insurers and other industry stakeholders have two weeks to provide comment on the proposed rules, Modern Healthcare reports. The final rules will be published on April 7. Insurers will have until June 2 to submit their Medicare Advantage plan bids (Modern Healthcare, 2/22).

GOP, Insurers Criticize Proposed Cuts

Republicans criticized the proposed cuts and the ACA.

Sen. Mitch McConnell (R-Ky.) said, "America's seniors are feeling the brunt of Obamacare's tax increases and cuts to Medicare" (New York Times, 2/21).

House Speaker John Boehner (R-Ohio) said that the cuts "represen[t] another broken promise by the president and another breach of trust with the American people by Democrats who run Washington" (Modern Healthcare, 2/22).

Separately, House Ways and Means Committee Chair Dave Camp (R-Mich.) said that the individuals "who rely on the Medicare Advantage program will lose the plans, benefits, doctors and financial protection they currently have."

Meanwhile, America's Health Insurance Plans President Karen Ignagni said that the cuts "would cause seniors in the [Medicare Advantage] program to lose benefits and choices" and potentially increase premiums and out-of-pocket costs (New York Times, 2/21).

Insurers have been anticipating the proposed cuts, and executives last week argued that reductions could mean passing on more costs to beneficiaries.

Separately, a bipartisan group of 40 senators earlier this month sent a letter to CMS Administrator Marilyn Tavenner asking the Obama administration to maintain current MA payment levels (Carey, "Capsules," Kaiser Health News, 2/18).

Experts Dispute Effect of Proposed Cuts

Some health policy experts and consumer groups dispute insurer claims that the cuts will increase premiums and reduce benefits, arguing that Medicare has in the past been able to keep costs and benefits mostly stable, Kaiser Health News reports.

Joe Baker, president of the Medicare Rights Center, said, "We have really overall had a rather calm year so the 'sky is falling' predictions from the health insurance industry did not come true."

According to Kaiser Health News, consumer advocates urge beneficiaries to research and select new MA plans each year in order to avoid individual plan premium increases and maintain their current level of care (Galewitz, Kaiser Health News, 2/23).